- This topic has 2 replies, 2 voices, and was last updated 1 month ago by Kim Smith.
June 27, 2022 at 5:08 pm #659415naveed42927
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Dear sir, I hope you are fine. I am facing some problems in my audit operation. I need your assistance. Can financial control also come in internal audit responsibilities? I mean if finance request internal audit to check documentation whether everything is fine so that we can process payment? Don’t you think so it is creating self review threat e.g., if some day internal audit is testing finance documentation then how can he find mistakes in something in which internal audit itself is involved? I think this comes under finance manager responsibilities to check financial document whether complete or not.
Also could you please let me know that is it compulsory or necessary that internal audit department staff salaries should only be charge to overheads not to salary accounts?June 27, 2022 at 7:05 pm #659450Kim SmithKeymaster
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I am not a consultant to offer practical advice – so I cannot say anything about what the work of an internal audit department should be “in the real world”.
ISA 610 states:
Determining Whether, in Which Areas, and to What Extent the Work of the Internal Audit Function Can Be Used
Evaluating the Internal Audit Function
15. The external auditor shall determine whether the work of the internal audit function can be used for purposes of the audit by evaluating the following:
(a) The extent to which the internal audit function’s organizational status and relevant policies and procedures support the objectivity of the internal auditors; (Ref: Para. A5–A9)
Then in A7:
A7. Objectivity refers to the ability to perform those tasks without allowing bias, conflict of interest or undue influence of others to override professional judgments. Factors that may affect the external auditor’s evaluation include the following:
? Whether the internal audit function is free of any conflicting responsibilities, for example, having managerial or operational duties or responsibilities that are outside of the internal audit function.
So there is nothing to say that IA cannot have conflicting responsibilities – only that if they do – that will affect the external auditor’s evaluation of internal auditors and the use of their work.
You can download ISA 610 here https://www.ifac.org/system/files/publications/files/ISA-610-(Revised-2013).pdfJune 27, 2022 at 7:12 pm #659451Kim SmithKeymaster
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The reporting of IA salaries (and other costs) will depend on the applicable financial reporting framework – e.g. under IFRS Standards (IAS 1) – they would be part of:
– “employee benefits expense” if SoPL is classified “by nature”; or
– “administrative expenses” if SoPL is classified “by function”.
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