Internal Audit Assignment

Q 1.A,

Internal Audit: The Internal Audit processes within large Limited companies to ensure all operation are running correctly and effectively. Using internal auditors ensures the company has the ability to survive in a competitive business environment, and continue to prosper. The Internal audit department will examine the internal controls within an organisation to helping directors to take their right decision within right time.

External Audit: Company Law requires the Directors of a company to prepare a set of financial statement at the end of each financial year. These financial statements are produced to show proper business view and position to all share holder and stake holder. Government agency such as revenue commissioner also

It is unlike cash accounting in which transaction is deemed as valid for recording when cash is actually received or paid. Accrual concept of accounting requires that financial statements reflect transactions at the time when they actually occur, not necessarily when cash changes the hands. This basis of accounting is generally used in preparing financial statements except for cash flow statement. Revenue is recorded when it is earned regardless of when it is received and expenses are recorded when they are incurred, regardless of when they are paid.

Benefits and importance:

1. Under accrual concept of accounting, financial statements reflect all the expenses associated with the reported revenues for an accounting period. The usability of financial information is thus increased.

2. It satisfies the requirements of major accounting standards applicable in the world such as generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS).

3. It is considered one of the general assumptions while interpreting financial statements by various users.

4. The departure from accrual concept ceases the ability of the users to compare the financial statements of an entity with that of others which ultimately results in less lucrative from investors’ point of

It is based not on past performance, but on current and future trends, which does not allow for exact numbers. Because managers often have to make operation decisions in a short period of time in a fluctuating environment, management accounting relies heavily on forecasting of markets and trends.

Differences:

Management accounting is presented internally, whereas financial accounting is meant for external stakeholders. Although financial management is of great importance to current and potential investors, management accounting is necessary for managers to make current and future financial decisions. Financial accounting is precise and must adhere to Generally Accepted Accounting Principles (GAAP), but management accounting is often more of a guess or estimate, since most managers do not have time for exact numbers when a decision needs to be