Introduction to Internal Audit

Pages: 16 (5093 words) Published: January 13, 2013
Master of Business Administration - MBA Semester 3 
Subject Code – MF0013 
Subject Name – Internal Audit and Control -4 Credits 
(Book ID: B1211) 
Assignment Set- 1 (60 Marks) 

Q.1 Critically evaluate the qualities of an Auditor in the wake of recent scams Ans:- What should be the qualities of Internal Audit Personnel? There is no universal answer to this question. We can only generalize about the qualities of internal Audit Personnel. It has been observed that internal auditors and independent auditors often belong to the same professional organization and are subject to the same professional regulations. Hence apart from professional qualification and experiences, the qualities of audit personnel should be same.  The Institute of Chartered Accountants of India (ICAI) has issued “SA-220-Quality Control for Audit Work” with an objective to establish standards on quality control as to the policies and procedures regarding of an audit firm for audit work generally, and procedures regarding the work delegated to assistants on an individual audit.  The standard is equally applicable to an internal audit department also. The head of internal audit department should regularly review the quality of audit work based on the standard mentioned below. Important extract of SA 220 are given below.  Important terms 

a) “The Auditor” means the person with final responsibility for the audit.  b) “Audit Firm” mean either the partners of a firm providing audit services or sole practitioner providing audit services.  c) “Personnel” means all partners and professionals staff engaged in the audit practice of the firm.  d) “Assistant” means personnel involved in an individual audit other than the auditor.  Audit firm 

1. The audit firm should implement quality control policies and procedures designed to ensure that all audits are conducted in accordance with the standards on auditing.  2. The objectives of the quality control policies to be adopted by an audit firm will ordinarily incorporate the following:  a) Professional requirements: Personnel in the firm are to adhere to the principles of independence, integrity, objectivity, confidentiality and professional behavior.  b) Skills and competence: The firm is to be staffed by personnel who have attained and maintain the technical standards and professional competence required to enable them to fulfill their responsibilities with due care.  c) Assignment: Audit work is to be assigned to personnel who have the degree of technical training and proficiency required in the circumstances.  d) Delegation: There is to be sufficient direction, supervision and review of work at all levels to provide reasonable assurance that the work performed meets appropriate standards of quality.  e) Consultation: Whenever necessary, consultation within or outside the firm is to occur with those who have appropriate expertise.  f) Monitoring: The continued adequacy and operational effectiveness of quality control policies and procedures is to be monitored.  3. The firm’s general quality control policies and procedures should be communicated to its personnel in a manner that provides reasonable assurance that the policies and procedures are understood and implemented.  Individual audits 

4. The auditor should implement those quality control procedures which are, in the context of the policies and procedures of the firm, appropriate to the individual audit.  5. The auditor, and assistants with supervisory responsibilities, will consider the professional competence of assistants performing work delegated to them when deciding the extent of direction, supervision and review, appropriate for each assistant.  6. Any delegation of work to assistants would be in a manner that provides reasonable assurance that such work will be performed with due care by persons having the degree of professional competence required in the circumstances.  Direction 

7. Assistants to whom work is delegated need appropriate...
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