Page 257 - F1 - AB Integrated Workbook STUDENT 2018-19

Audit and financial control

6.3 Limitations of internal audit

Internal auditors have an unavoidable independence problem. They are
employed by the management of the company and yet are expected to five an
objective opinion on matters for which management are responsible.

Internal audit will only succeed if it is properly staffed and resourced.

If internal auditors identify fraud, they may be unwilling to disclose it for fear of
repercussions.

These limitations can be reduced if an audit committee:

 sets the work agenda for internal reports

 receives internal audit reports

 is able to ensure the internal audit is properly resourced

 has a ‘voice’ at main board level.

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