Internal Auditor Interview Question 1

Summary

In this video, Prabh Nair provides an insightful overview of common interview questions for internal audit roles. Covering topics like the definition of internal audit, audit evidence, internal controls, audit programs, and the audit process, he offers valuable explanations and real-world examples to help viewers prepare. He emphasizes the importance of understanding audit practices, from reporting to handling disagreements in audit findings, and outlines the various types of audit reports. The video aims to equip aspiring internal auditors with the knowledge to succeed in their interviews and perform effectively in the field.

Takeaways

• 😀 Internal auditing is an independent, objective assurance activity that adds value to an organization by improving operations.
• 😀 Internal auditors assess the effectiveness of risk management, control, and governance processes within an organization.
• 😀 Audit evidence should be sufficient, competent, and relevant to support audit findings, such as identifying non-compliance or process gaps.
• 😀 An audit program outlines the procedures auditors follow, ensuring consistency and structure in the auditing process.
• 😀 Internal controls are designed to reduce risk and ensure compliance, with types including preventative, detective, corrective, directive, and compensating controls.
• 😀 Separation of duties (SOD) is an internal control designed to prevent fraud by ensuring that no one person controls all aspects of a transaction.
• 😀 The internal audit process includes planning, fieldwork, preparing reports, and following up to ensure corrective actions are implemented.
• 😀 Different types of audit reports include interim, draft, final, and follow-up reports, each serving a specific purpose in the audit process.
• 😀 An audit charter is a formal document that defines the internal audit function's scope, authority, and responsibilities within an organization.
• 😀 Internal auditors have direct reporting relationships with senior management and are key players in ensuring the effectiveness of internal controls and compliance.

Q & A

What is internal audit and what role does it play in an organization?

Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization achieve its objectives by evaluating and improving the effectiveness of risk management, control, and governance processes. Internal audit acts as the third line of defense, reporting directly to the board of directors to provide independent assessments of internal controls.

What is the difference between audit evidence and audit findings?

Audit evidence refers to the information used to support the auditor's findings. It should be sufficient, competent, and relevant to the audit process. Audit findings are the conclusions drawn from the evidence, highlighting areas of concern, gaps, or non-compliance within the audited process or system.

Can you explain the concept of an audit program?

An audit program is a set of detailed steps that auditors follow to gather appropriate evidence during an audit. It helps ensure consistency and uniformity across different auditors in an organization by providing standardized procedures and instructions for performing the audit.

What are the types of internal controls in an organization?

The types of internal controls include: preventative controls (e.g., firewalls, antivirus software), detective controls (e.g., intrusion detection systems), corrective controls (e.g., incident management processes), directive controls (e.g., company policies), and compensating controls (e.g., backup systems in case the primary controls fail). These controls work together to mitigate risks and safeguard the organization.

How would you explain internal control within the context of financial processes?

Internal control in financial processes ensures the integrity of financial reporting, efficiency of operations, and compliance with laws and regulations. For example, the 'separation of duties' control ensures that no single person can perform all key steps in a financial transaction—this minimizes the risk of fraud and error by requiring multiple people to complete a transaction.

What is the internal audit process, and what steps are involved?

The internal audit process typically involves the following steps: sending an engagement letter to the auditee, conducting pre-audit meetings to understand processes, preparing an audit plan and risk matrix, executing fieldwork (such as interviews and sample testing), preparing a draft report with findings, reviewing the report with the auditee for feedback, finalizing the report, and sending it to senior management and the board. Follow-up audits may be performed to ensure corrective actions are taken.

What types of audit reports are commonly used in internal auditing?

The types of audit reports include: interim engagement reports (shared during the audit process), draft audit reports (shared for feedback), final audit reports (sent to management and the board), follow-up reports (to check if agreed actions are implemented), and board meeting reports (presented to the board without detailed explanations). These reports serve different purposes at various stages of the audit.

How should an auditor handle situations when there is disagreement over audit findings?

If there is a disagreement over audit findings, the auditor should escalate the issue to higher management, such as the head of the internal audit department. The audit team and management will work together to resolve the disagreement. If necessary, the issue can be escalated further within the organization until a satisfactory solution is reached.

What is an audit charter, and why is it important?

An audit charter is a formal document that defines the purpose, authority, and responsibilities of the internal audit function. It establishes the scope of the audit, outlines the roles of auditors and management, and sets the relationship with external auditors. The audit charter ensures clarity and transparency in the audit process and gives auditors the authority to carry out their tasks independently.

Can you explain the role of audit evidence in proving audit findings?

Audit evidence is crucial in validating the auditor's findings. It should be sufficient, competent, and relevant to the area being audited. For example, evidence might include records, screenshots, or data samples that demonstrate non-compliance with procedures. The evidence supports the auditor's conclusions and provides a factual basis for identifying gaps or areas of improvement.