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Master of Business Administration- smude MBA Semester 3 spring 2015

MF0013: Internal Audit and Control
Q1. Distinguish between secretarial audit and cost audit. Write the advantages and
disadvantages of continuous and periodical audit.

Answer: Secretarial audit

Secretarial audit may be called as legal audit. A company registered under the Companies
Act, 1956 has to comply with various provisions of the Act. A company secretary
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Q2. Write the characteristics of internal check system. Explain the essentials of
effective internal auditing.

Answer: Principles of an Effective Internal Check System

Clear demarcations of responsibility and authorities: The duties, responsibilities and
authorities of every employee should be clearly demarcated. Every employee, should know,
in clear terms what they are supposed to do and for achieving that what authorities
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Q3. The audit firm follows certain policies and procedures. Explain the quality control
Policies adopted by an audit firm.

Answer: Quality of Internal Audit Personnel

What should be the qualities of Internal Audit Personnel? There is no universal answer to
this question. We can only generalize about the qualities of internal Audit Personnel. It has
been observed that internal auditors and independent auditors often belong to the
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Q4. Explain the basic principles of governing internal control.

Answer: Basic Principles Governing Internal Control

Following are given, in a summarized form, some of the important basic principles governing
internal control:
1. A proper system, preferably in writing, must be implemented in the entity, in such a way
that origination, recording and accounting of business transactions take place
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Q5. Discuss the specific problems of Electronic Data Processing (EDP) relating to
internal control.

Answer: In planning the portions of the internal audit which may be affected by the entitys
EDP Environment, the auditor should obtain an understanding of the significance and
complexity of the EDP activities and the availability of data for use in the
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Q6. Explain the factors for having the effective internal control system for a bank.

Answer: Basic considerations for having an effective internal control system for cash and
bank balances are as follows:
The receipt and opening of mail should be handled by an independent official. A statement of
receipts of money orders and cheques should be prepared as
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