The scope and objectives of internal audit ate set by management and vary widely. The areas of activity may include:
- Reviewing accounting systems and internal control;
- Examining financial and operating information for management, including detailed testing of transactions and balances;
- Reviewing the economy, efficiency and effectiveness of operations and of the functioning of non financial controls;
- Review of the implementation of corporate policies, plans and procedures;
- Special investigations.
Some of these functions are directly relevant to the objectives of the external auditor—seeking evidence of the truth and fairness etc., of items in the Accounts. Even special investigations may be relevant. For example, an investigation into the extent of slow moving stock is relevant to the value of stock or an investigation into the viability of a branch may be evidence as to the correctness of using going concern values for that branch's assets.
Some of the functions are clearly not relevant to the external auditor's objectives. For example, the cost of a control is not relevant, only its effectiveness.
Some internal audit work is not audit work at all but is part of internal control. For example internal audit in Local Authorities may scrutinize and approve expenses claims. Such work is an internal control but is not auditing.