Nama : Sri Widya Ningsih
NPM : 184020052
Class : 18AKJ
INTERNAL AUDITING
Please Answer these questions below:
1. What is the role of Internal Audit?
Answer:
The Institute of Internal Auditors (IIA) defines Internal Auditing as:
“An independent, objective assurance and consulting activity designed to add value and
improve an organization’s operations. The internal audit activity helps an organization
accomplish its objectives by bringing a systematic, disciplined approach to evaluate and
improve the effectiveness of risk management, control and governance processes.”
Consistent with its mission, the Internal Audit Department provides management with
information, appraisals, recommendations, and counsel regarding the activities examined
and other significant issues.
The department executes an approved audit plan and will perform the following tasks
in accordance with its overall strategy:
Verify the existence of assets and recommend proper safeguards for their protection;
Evaluate the adequacy of the system of internal controls;
Recommend improvements in controls;
Assess compliance with policies and procedures and sound business practices;
Assess compliance with state and federal laws and contractual obligations.
Review operations/programs to ascertain whether results are consistent with established
objectives and whether the operations/programs are being carried out as planned;
Investigate reported occurrences of fraud, embezzlement, theft, waste, etc.
2. What all of the remainder of the IIA’s definition of internal auditing covers a number of
important terms that apply to the profession?
Answer :
An effective way to begin to understand internal auditing and its key CBOK areas is to
refer to the internationally recognized internal audit professional organization, the IIA, and
its published professional standards that define the practice:
“Internal auditing is an independent appraisal function established within an organization
to examine and evaluate its activities as a service to the organization.”
This statement becomes more meaningful when one focuses on its key terms. Auditing
suggests a variety of ideas. It can be viewed very narrowly, such as the checking of
arithmetical accuracy or physical existence of accounting records, or more broadly as a
thoughtful review and appraisal at the highest organizational level. Throughout this book,
the term auditing will be used to include this total range of levels of service, from detailed
checking to higher‐level appraisals. The term internal defines work carried on within an
enterprise, by its own employees, in contrast to external auditors, outside public
accountants, or other parties such as government regulators who are not directly a part of
the particular enterprise.
The remainder of the IIA’s definition of internal auditing covers a number of important
terms that apply to the profession:
Independent is used for auditing that is free of restrictions that could significantly
limit the scope and effectiveness of any internal auditor review or the later reporting
of resultant findings and conclusions.
Appraisal confirms the need for an evaluation that is the thrust of internal auditors as
they develop their conclusions.
Established confirms that internal audit is a formal, definitive function in the modern
enterprise.
Examine and evaluate describe the active roles of internal auditors, first for fact‐
finding inquiries and then for judgmental evaluations.
Its activities confirm the broad jurisdictional scope of internal audit work that applies
to all of the processes and activities of the modern enterprise.
Service reveals that the help and assistance to the audit committee, management, and
other members of the enterprise are the end products of all internal auditing work.
To the organization confirms that internal audit’s total service scope pertains to the
entire enterprise, including all personnel, the board of directors, and their audit
committee, stockholders, and other stakeholders.
3. What is the difference between external auditing and internal auditing?
Answer:
The difference between internal and external audit
External Audit Internal Audit
Reports to Shareholders or members The board and senior
who are outside themanagement who are within the
organisations governance organisations governance
structure structure
Objectives Add credibility and reliability
Evaluate and improve the
to financial reports from the effectiveness of governance, risk
organization to its
management and control
stakeholders by givingprocesses. This provides
opinion on the report members of the boards and
senior management with
assurance that helps them fulfil
their duties to the organization
and its stakeholders
Coverage Financial reports, financial All categories of risk, their
reporting risks management, including
reporting on them
Responsibility for None, however there is a duty Improvement is fundamental to
improvement to report problems the purpose of internal auditing.
But it is done by advising,
coaching and facilitating in
order to not undermine the
responsibility of management.
4. The remainder of the IIA's definition of internal auditing covers a number of important
terms that apply to the profession. One of term is "appraisal". Appraisal meant…
Answer :
Appraisal confirms the need for an evaluation that is the thrust of internal auditors as they
develop their conclusions.
5. What is the responsibility of Internal Audit of the Company?
Answer:
Ensuring the success of an organization and bridging the gap between the board of
directors and the corporate management team is a key performance indicator. Below are
some of their specific responsibilities and duties:
1. Evaluating risk management activities within the organization.
2. Determining the organization’s compliance with relevant laws and regulations.
3. Evaluating and making recommendations that can assist in improving internal control.
4. Investigating fraud via a fraud risk assessment that uses fraud deterrence principles.
5. Offering an objective source of independent advice to help reach the goal and achieve
legality and validity.
6. Performing audit assignments assigned to them
7. Learning and studying the organization’s policy and guidelines.
8. Identifying audit scope and developing annual plans within the organization.
9. Gathering, analyzing, evaluating, and presenting accounting documentation, reports,
data, and flowcharts.
10. Following up the audits to monitor the managements’ intervention.
11. Promoting ethics and identifying improper conduct within the company.
6. What things that must be considered so that a company can have an effective Internal Audit
Department?
Answer:
a. Internal audit must have an independent position within the company organization
b. Internal Audit Department must have a job description
c. The Internal Audit Department must have an internal audit manual
d. There must be support from top management
e. The Internal Audit Department must be professional, capable, have objectivity, have
high integrity and loyalty
f. Internal audit must be able to work closely with public accountants
CASE:
PT. XYZ is contractor company. They got a project to build a new highway in Surabaya. The
project only started work in early 2019, and PT. Developing the Nation undertakes to complete
this project by the end of 2020.
However, in reality, until mid-2020 the construction of this “Underpass” had not been
completed. PT. XYZ received a reprimand from the Government regarding this problem.
Management of PT. XYZ asked Internal auditors to audit this highway construction project.
When you did the preliminary audit you found some of the findings were:
1. Many workers quit because they feel that their income is not commensurate with what they
do.
2. The number of workers who start work late.
3. There is a delayed salary due to deposition of funds in the finance department.
4. Inhibition of receipt of development funds provided by the Regional Government, which
is due to the fact that the local government has not disbursed funds.
5. The high cost of renting heavy equipment that must be used for this construction.
6. Increased raw material costs for the construction of this highway.
Questions:
1. In your opinion, what caused the many findings that you obtained from the preliminary
audit results that caused the weakness to occur?
Answer :
a. Lack of coordination between fellow workers
b. Lack of integrity and ethical values of the workers
c. Weak internal control system
d. Lack of dream commitment
e. There is a transfer of financial manager
f. There are regulatory changes
2. Give suggestions or input to the management of PT XYZ so that this development can be
quickly completed.
Answer :
a. Make salary adjustments to workers according to their work
b. Provide strict sanctions to workers who violate work discipline in this case punctuality
in work and provide bonuses to workers who are disciplined in doing work
c. Give a warning to the finance department of PT XYZ which has been proven to deposit
employee salaries
d. Finding out again to the local government about the reasons why development funds
were delayed in disbursement
e. Minimizing the use of heavy equipment with the aim of saving the rent that must be
paid
f. Selecting the use of raw materials that are really needed for toll road construction,
selection of raw materials aims to avoid waste
