MF0013 – INTERNAL AUDIT AND CONTROL

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ASSIGNMENT

DRIVE	WINTER 2016
PROGRAM	MASTER OF BUSINESS ADMINISTRATION (MBA)
SEMESTER	III
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.

Question. 1. Distinguish between Government audit and Specific audit. Explain types of Government And Specific Audit?

Answer: Audit is an appraisal activity undertaken by an independent practitioner (e.g. an external auditor) to provide assurance to a principal (e.g. shareholders) over a subject matter (e.g. financial statements) which is the primary responsibility of another person (e.g. directors) against a given criteria or framework (e.g. IFRS and GAAP).

Main types of audit engagements and services include:

External: External audit, also known as financial audit and statutory audit, involves the examination of the truth and fairness of the financial statements of an entity by an external auditor who is independent of the organization

Question. 2. Elaborate the similarity and dissimilarity of Internal and External Audit? Explain the Co-operation between external and internal auditor.

Answer: The term “Audit”, with the advancement of knowledge, has become a word that needs definition to understand what it means.

Of the most prevalent audit types are financial audit, which is usually called External Audit, and Internal Audit.

Financial audit is an important activity used by business entities to express an opinion on the validity and fair presentation of the Financial Statements.

Meanwhile, Internal Audit is an important tool used to verify integrity of internal control systems and their implementation, thus achieving internal control.

Question. 3. The audit firm follows certain policies and procedures. Explain the quality control policies adopted by an audit firm.

Answer: In exercise of the powers conferred by Section 28A of the Chartered Accountants Act, 1949, consequent to the Chartered Accountants (Amendment) Act, 2006, the Central Government, by notification, constituted a Quality Review Board consisting of a Chairperson and ten other members. Quality Review aims to assess the quality of audit of the financial statements of a company as well as the work done by the auditors in carrying out their statutory function.

(a) Criteria based on companies whose accounts have been audited:

i. In the initial stage, the audited accounts of companies having wider public interest, such as listed companies, may be selected on the basis of one or more of the following:-

Question. 4. List and explain the elements of Internal Control. Explain the basic principles of governing internal control

Answer: Internal Controls are to be an integral part of any organization's financial and business policies and procedures. Internal controls consists of all the measures taken by the organization for the purpose of; (1) protecting its resources against waste, fraud, and inefficiency; (2) ensuring accuracy and reliability in accounting and operating data; (3) securing compliance with the policies of the organization; and (4) evaluating the level of performance in all organizational units of the organization. Internal controls are simply good business practices.

Responsibility: Everyone within the University has some role in internal controls. The roles vary depending upon the level of responsibility and the nature of involvement by the individual. The Kansas Board of Regents,

Question. 5. List and Explain the specific problems of Electronic Data Processing (EDP) relating to internal control.

Answer: Specific Problems of Electronic Data Process relating to Internal Control  In an EDP system, the following problems arise in the implementation of internal control:

(a) Separation of duties: In a manual system, separate individuals are responsible for initiating transactions, recording transactions, and custody of assets. As a basic control, separation of duties prevents or detects errors and irregularities. In a computer system, however, the traditional notion of separation of duties does not always apply.

Question. 6. Explain the factors for having the effective internal control system for a bank.

Answer: As per Auditing and Assurance Standard 1 issued by ICAI, the Management is responsible for maintaining an adequate accounting system incorporating various internal controls to the extent appropriate to the size and nature of the business. Internal Controls assure about the adequacy of accounting and other related systems of the organization and are conducive to achievement of organizational goals. However, the scope of Internal Control Systems is not limited to only those matters which relate directly to the functions of the accounting system in an organisation. As per Auditing and Assurance Standard 6 issued by ICAI

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