MF0013 & INTERNAL AUDIT AND CONTROL

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ASSIGNMENT

DRIVE	SPRING 2014
PROGRAM	MBADS (SEM 3/SEM 5) MBAFLEX/ MBAN2 (SEM 3) PGDFMN (SEM 1)
SUBJECT CODE & NAME	MF0013 & INTERNAL AUDIT AND CONTROL
BK ID	B1733
CREDITS	4
MARKS	60

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

Q.1 General audits are classified into independent audit, internal audit and government audit. Give a brief introduction of general audit. Explain all the three types of audit covering all the important things under each audit.

Ans : General audit :

The term audit is derived from the Latin term ‘audire,’ which means to hear. In early days an auditor used to listen to the accounts read over by an accountant in order to check them . Auditing is as old as accounting. It was in use in all ancient countries such as Mesopotamia, Greece, Egypt. Rome, U.K. and India. The Vedas contain reference to accounts and auditing. Arthasashthra by Kautilya detailed rules for accounting and auditing of public finances

Q.2 Internal Audit and External Audit – There are similarities and dissimilarities between internal and external audit.

Ans :  Explanation of similarity :

There are several similarities between internal and external audits. Both observe the manner in which the company conducts business. Both assess the possibility of fraud or theft, and both compare regulations and laws with the actual operation of the firm. The recommended skill sets and qualifications for both types of auditors are also similar. For each, a familiarity with the type of business audited is a strong advantage. A detailed understanding of accounting, finance or general business also assists both types of audits.

Explanation of dissimilarity :

Q. 3 Explain the qualities of an internal audit personnel.

Ans :  Qualities of an internal audit personnel :

As the role of the internal auditor shifts, through regulatory changes or a more volatile economy, so, too, do the skills required to do the job well. The skills shift is demonstrated by what companies expect of the internal audit function. Technical skills are a prerequisite, but those skills alone are not enough as the job’s scope broadens.

“The evolution of the skills of internal audit professionals is aligning with, or is corresponding to, the evolution of the profession itself,” said Richard Chambers, chief executive and president of the Institute of Internal Auditors (IIA). Chambers was the co-author of a recent report, Succeeding as a 21st Century Internal Auditor: 7 Attributes of Highly Effective Internal Auditors. The report, produced by the IIA and global staffing firm Robert Half, listed

Q.4 Planning is the key to an effective and efficient audit.  Explain the importance of Internal Audit Planning and factors to be considered in Internal Audit Planning.

Ans :  Explanation of importance of internal audit planning :

Internal Audit planning is based on an annual cycle that runs in line with each academic year. Each Internal Audit will cover all key activities of the institution at least once and some areas that are considered to be high risk or high priority are often covered more than once. Each summer the Internal Auditors meet with Strategic Planning to plan the internal audit schedule for the academic year identifying the areas for review. Strategic Planning then notifies Colleges and Services about audits involving them in order to try and schedule a time during the year that is most convenient for the audit to take place.

Q. 5 Internal check is an arrangement of staff duties whereby no one person is allowed to carry through and record every aspects of a transaction. Write down the objectives of internal check with an example. Explain the advantages of internal check.

Ans :  Objectives of internal check with example :

Internal check is an organization of the system of account under which the work of one person is automatically checked by another, with a view to prevent and detect the errors and frauds. Under such a system, it is not possible to commit errors & frauds without the collusion between to or more people.

Objective of internal check:

• To minimize the possibility of error, fraud and irregularity.
• To prevent the misappropriation of cash and goods

Q. 6 Write short notes on :

a) Accounting system and internal control

b) Review and preliminary evaluation of internal control

c) Compliance procedures of internal control

Ans :  Accounting system and internal control :

Accounting system is Organized set of manual and computerized accounting methods, procedures, and controls established to gather, record, classify, analyze, summarize, interpret, and present accurate and timely financial data for management decisions.

Internal control, as defined in accounting and auditing, is a process for assuring achievement of an organization's objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies. A broad concept, internal control involves everything that controls risks to an organization. It is a means by