Discuss briefly the terms Internal Control and Internal Audit. What are the distinguishing features between them?

Auditing and Assurance Revision Questions and Answers

Answer
Internal control is the plan of organization and all the methods and procedures adopted the management of an entity to assist in achieving management’s objective of ensuring, as far as practicable, the orderly and efficient conduct of its business including adherence to management policies, the safeguarding of assets, the prevention and detection of fraud and error and accuracy and completeness of the accounting records and the timely preparation of reliable financial information. The system of internal control extends beyond those matters which relate directly to the functions of the accounting system. Internal audit means the independent appraisal activity within an organization for the review of accounting, financial and other business operations. It consists of a continuous critical review of financial and operating activities a staff of auditors. Internal audit is a managerial tool and it aids the management as a control function.

Distinguish features between internal control and internal audit:

Internal control, as the definition clearly shows, is a very broad term which encompasses internal audit also in its folds. Though internal auditing is a part of total internal control system, it is indeed a significant part in as much as through this, actualities of performance and compliance with management policies and practices are ascertained on a continuous and timely basis and brought to the notice of management. Another important aspect of internal audit is that it also reviews the overall internal control system, its efficacy or redundancy, though it itself as a part of the total internal control system. In other words, internal audit, though a part of the total internal control system is also a significant complement of the system in so far as it reviews the system itself and checks its operation so that management can be posted with up to date information on the effectiveness of control and the underlying operation



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