Houda Badaoui PGE3 alternance
Mid term
Audit and Internal Control
1- What are the difference between the internal and the external audit?
=>Internal audit is an activity carried out by auditors, these auditors are employees of the
company they are auditing, to evaluate and improve the effectiveness of risk management,
control, and governance processes in an organization. External audit is an activity carried out by
independent auditors, in accordance with the law to provide financial statements of a company
or organization.
=>In internal auditing, the reports are reported and used by the management body of the
organization while in external auditing the reports are directed to the stakeholders
=>Internal auditors can be used to advise the employees and offer consulting assistance to the
employees of the organization while external auditors are constrained from supporting the audit
client
2- Give a brief definition/steps of an audit process?
Audit process is a set of actions and procedures to control an organization. One of the objectives
of the audit process is to verify that all company processes are aligned with this strategic vision
The steps of the audit process are as follows:
Step 1: Planning
Step 2: Notification
Step 3: Opening Meeting
Step 4: Fieldwork
Step 5: Report Drafting
Step 6: Management Response
Step 7: Closing Meeting
Step 8: Final Audit Report Distribution
Step 9: Follow-up
3- What the most important points to audit in the;
- Inventorie cycle process
The most important thing is to verify not only the amount of inventory but also its quality and
condition to see whether the value of the inventory is fairly represented in financial records and
statements
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Purchase/payable cycle process:Tracing transactions recorded in the purchases journal, exa
Equity cycle: Stocks inssurance, provisions about owner’s equity, review debt provisions and
senior securities
4- Our topic was about audit of consolidated financial statements.
Consolidation is the result of the legal requirement for companies that control other companies
or exercise significant influence over them to prepare consolidated financial statements and a
group management report.
The consolidated accounts must present the financial situation of a group of companies as if they
were a single entity.
Accounting consolidation process:
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Collecting data at the subsidiary level
Mapping data to a central chart of accounts structure
Applying foreign exchange rates for currency translations
Eliminating inter company transactions and interests elimination
5- In the realm of auditing and reviewing the financial statements as per the closing date of a
company, on a first hand the focus should be on obtaining an in-depth understanding of the
planning, risk identification, strategy and risk assessment in relation to the audit of the
financial information of the component as per example : the relevant industry, the nature of
the component , the internal and external risks affecting the company that could affect
directly the financial statements, Once the plannning is finished, it is time for the auditor to
measure the framework and extent of his final intervention by evaluating the internal
controls deployed so as to determine the procedures to performed.
Evaluating internal controles of an audit component can be stretched in 3 fundamental parts:
Assessing the Design&implementation of the internal controls made and deployed to
prevent potential risks.
Operating effectiveness procedures : once we setteled on the design of the CI it is important
to review the effectiveness of it and the degree of regularity of these points of controls.
For example we can determine a sample of bills or contracts on the revenue cycle to review
controls implemented (validations by superiors, stamps and signatures...)