Skip to content

CS Professional · Internal and Forensic Audit · Internal Audit: Introduction and Overview

Mehta Pharma Ltd's statutory auditor is appointed by the members at the general meeting. The head of internal audit, Ms. Rao, is appointed by the audit committee on the board's recommendation and can be an employee. Which statement about appointment and independence is correct?

An internal auditor may be an employee or an outsourced professional, with independence supported by reporting to the audit committee. The statutory auditor is an external person who must be independent of the company and cannot be its employee.

  1. AThe internal auditor must always be a chartered accountant in practice and cannot be an employee
  2. BThe statutory auditor can be an employee of the company if the board agrees
  3. CInternal auditors cannot be employees because that would destroy objectivity entirely
  4. DThe internal auditor may be an employee, and independence is preserved through reporting to the audit committee and organisational status, whereas the statutory auditor must be independent of the companyCorrect

Explanation

An internal auditor can be an employee or an outsourced firm, and objectivity is supported by reporting lines such as the audit committee. The statutory auditor, being external, cannot be an employee and must be independent. The option saying employees can never be internal auditors is wrong.

Did you get it right without looking?

One question tells you little. A timed set on Internal Audit: Introduction and Overview shows your real accuracy, how long you take and where you lose marks.

Practise Internal Audit: Introduction and OverviewFree diagnostic mock

More Internal Audit: Introduction and Overview questions