Internal Auditing-Help

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Please can anbody explain the reasons why an internal auditor should or should not report his findings on internal control to the following people:<BR><BR>chief accountant<BR>the board of directors<BR><BR>I can't find anything in the text book relating to this unless I've missed it!!!<BR><BR>Any help would be appreciated.<BR><BR>Thank you.

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Internal Auditing-Help

    Hiya Beaky,<BR><BR>Personally I'd say the material aspect of what an auditor finds depends on who it's reported too. For instance you wouldn't circulate findings to a Chief Exec. if there's 15 quid gone out of petty cash but you would if you'd uncovered and had evidence of some major fraud.<BR><BR>A lot of audit work revolves around system weaknesses and how internal control can be strengthened to reduce weakness - the aspect of the audit, depends on who received the findings. You wouldn't inform the chief accountant about findings on a health and safety review for example.<BR><BR>Generally speaking any findings would be addressed to the line manager responsible for any action recommended by an auditor (Chief Accoutant) and that person's director (Financial Director or whoever) would be copied in on the report as a matter of courtesy.<BR><BR>ALL audit findings would be reported to an audit committee which is basically a body of people who's duty it is to ensure that the audit team are active to the best of their ability in the areas that are most relevant.<BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Internal Auditing-Help

    Chief accountantant<BR><BR>It would be inappropriate for internal audit to report to the chief accountant, who is largely in charge of running the system of internal control. It may be feasible for him or her to receive a report as well as the Board. Otherwise, the internal audit function cannot be effectively independent as the chief accountant could suppress unfavourable reports or he or she could just not act on the recommendations of such reports.<BR><BR>Board of directors<BR><BR>A high level of independence is achieved by the internal auditors if they report directly to the Board. However, there may be problems with this approach.<BR>(1) The members of the Board may not understand all the implications of the internal audit reports when accounting or technical information is required.<BR>(2) The Board may not have enough time to spend considering the reports in sufficient depth. Important recommendations might therefore remain unimplemented.<BR>A way around these problems might be to delegate the review of internal reports to an audit committee, which would act as a kind of sub-committee to the main board. The audit committee might be made up largely of non-executive directors who have more time and more independence from the day-to-day running of the company.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Internal Auditing-Help

    Thanks everybody for your time and thoughts on this. I have only posted two questions on this site and they have been answered staright away. It's great to have a site like this to share the heavy load of the technician stage. Thank you again<BR><BR>Happy Christmas and a Happy New Year to all students studying the AAT.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Internal Auditing-Help

    It will all depend on the materiality of the item and the previously agreed reporting channels. Of course the chief accountant needs to know about matters residing in his/her domain so that corrective action may be taken. For trivial items this will be sufficient. For more significant items more senior staff may need to know, including at audit committee or even main board level. In any case there should be internal audit follow-up to ensure appropriate action has been taken. The audit committee will have access to and review internal audit reports. It will report in summary to the main board, and matters of high materiality will be highlighted and invariably debated. The other means to highlight concerns is the management letter from the external auditor, which goes to the audit committee, but the ultimate audience is the directors, that is the main board. Internal audit will be consulted on this. The audit committee is acting as a sub-committee of the board, but the board has the ultimate responsibility as is clear in all the corporate governance reports from Cadbury to Turnbull, now mandated by the London Stock Exchange listing requirements.<BR><BR>Professor Gerald Vinten PhD CPFA MAAT

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