Internal Audit and Cost Manager Interview Questions & Answers

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The internal audit is conducted to help the management. The weakness of the management is disclosed. The external audit is conducted to help the shareholder. The rights of owners are protected. The appointment of internal audit is made by the management. The appointment in external audit is made by the shareholders. Internal audit is the part of internal control.

External audit is the not the part of internal control.The internal audit can suggest improvement in internal check system. The external audit can not suggest improvement in internal check system. The internal audit can perform his duties under the terms of appointment. The management can limit the scope of work at any time. The external auditor can perform his work to terms of appointment and other prescribed law. The scope is very wide. Internal audit is an employee of the company. He is not an independent person. External auditor is not an employee of the company.

Internal audit nothing but the checking the product that you produced.
External audit is checking your product by your customer.

Here it means you may not find mistakes in your processes but a third man who comes and check the system he may see some deviations in the system and give suggestions for the improvements of the system.

The basic principles of financial internal control are explained below:Financial and accounting operations must be separated that is the handling of cash and the recording of the movement thereof should be done by different persons. Responsibility for the performance of the job must be clearly stated so that there may be no room for doubt or confusion subsequently.

Too much confidence should not be pinned in one individual. Nearly all frauds have been committed by trusted officials or employees. It is interesting to note that frauds have occurred owing to their being trusted. Relation principle relating to transfer of an employee from one job to another should be the inflexible guiding rule. This is an effective safeguard against collusion and is recognized as an important canon of sound organization.

Mechanization of the work wherever feasible and practicable should be resorted to, mechanical devices such as cash register, recording time clocks, calculation machines should be introduced. A system of control accounts should elegantly be fitted in the book keeping system.

The work should be so arranged that work done by one employee should be properly checked by independent employee. Such continuous and constant checking goods moral control and the errors and the frauds cannot go undetected.

Intangible assets are those which we can't be seen like goodwill of the company.

Tangible Assets are those assets which we can see or touch like fixed asset ,machinery,etc.

Vouching is the process of checking for the existence an example for this is checking from the final record to the supporting document.

One auditing firm can audit other auditing firm.

CARO means company audit report order 2004.It describes the matter on witch Statutory Auditors has to report in their Audit Report.

Social audit is performed to know the corporate social responsibility.

Final audit is commenced when all account has been closed and final accounts is been prepared.

This is a review of operation carried out sometimes continuously specially assigned staff with in the client business.

External audit is that which is critical review of the representation of the published financial statements it is compulsary for all company;s which are listed in the stock exchange.

This is the audit not specially required by law this scope of the audit will be outline by the contract between the auditor and the clients.

► Statutory Audit
► Non-statutory Audit
► External Audit
► Internal audit
► Final Audit
► social audit
► performance Audit

It is requested by Audit committee or the Company's; shareholders. The main objective of modern Audit is to help the MGMT to achieve its various objectives by bringing a systematic approaches and evaluating the risks.

Audit control procedures are policies and procedures in addition to control environment, (altitude,awareness and actions of directors and management regarding the internal control system) which the management has established to achieve the entity specific objectives.the mix of type of controls implemented by the management will depend on the control objectives and the size of the entity.

Attempt of a legally review of the accuracy of an entities financial records.

Providing key description on the type of audit to be taken place and to analyse the responsibilities during the field work as well as client to be aware of what is going to happen after the field work.

Internal Audit is an audit, it is carried out either by a separate department within the bank or a firm of chartered accountant.

Significance of Internal Auditing:
Internal auditing refers to an assessment activity managed within a corporation as a check to the entity. Its main function is to monitor control within the corporation.
The task of internal auditing is determined by organization itself, and its goals differ from those of the external auditor who is appointed to report independently.

The depth and goals of internal auditing vary widely and depend on the volume and structure of the body and the requirements of its administration. Ordinarily, the importance of internal auditing can be seen by one or more of the following:
► Implementing and monitoring of sufficient internal control. That is the duty of management that demands proper attention on a permanent basis. Internal auditors are ordinarily assigned definite task by management for reviewing controls, monitoring their function and suggesting improvements for them.
► Inspection of monetary and operational information. This may include review of the means used to recognize, determine, categorize and report such information and definite inquiry into individual items as well as in depth testing of balances, transactions and procedures.
► Review of the economy, effectiveness and efficiency of operations including non-financial controls of the corporation.
► Review of fulfillment of laws, regulations and other external requirements and compliance with administration policies and commands.

An audit helps keep track of where the money is going and makes sure the money is going where it is supposed to and not in someone's pocket. An audit can also help a company know if it is losing or making more money.

Advantages of Internal Audit are following:
It is in-expensive.
No charted accounted is required to audit internally.
Errors will be removed before preparing financial statements.
There will not be any type of embarrassment in the society because errors have been removed.
Accounting staff will remain in pressure so record will remain update every time in the organization.

An internal audit is one which is conducted by the internal auditors of the company. It is not mandatory for the company and the company just conducts it to keep a check on the operations of the company. On the other hand statutory audit is very important because it is by the external auditors and it is mandatory for all kinds of companies. Statutory audit is usually conducted for various purposes like tax regulatory requires it for taxation purposes.

Compliance procedures are tests designed to obtain reasonable assurance that these internal controls on which audit reliance is to be placed are in effect. The auditor can test the functioning of the controls and not the transactions. He can check the exceptions and departure from suggested internal control. When there is strict supervisory control the staff can not digress from prescribed control procedures. Compliance procedures can be applied with the help of audit sampling.

The samples can be selected from various categories of transaction in order to test the control aspect. He can examine evidence through inspection of signature. He can apply re performance and observation techniques. He can check custodial control over assets. He can examine the segregation of duties. He can go through supervisory controls. The auditor can test all the items included in the sample. The compliance procedures can ensure the auditor that internal control exists. The control is operating effectively. The control has so operated throughout the period of intended reliance.