Question

Which of the following statements regarding an internal audit function's continuous auditing responsibilities is/are true?

I. The internal audit function is responsible for assessing the effectiveness of management's continuous monitoring activities.
II. In areas of the organization in which management has implemented effective monitoring activities, the internal audit function can conduct less stringent continuous assessments of risks and controls.

Answer 1

The internal audit function is tasked with assessing the effectiveness of management's continuous monitoring activities and may adjust the intensity of their audits based on the effectiveness of management's monitoring, focusing more on areas that present higher risks.

Step-by-step explanation:

The internal audit function plays a crucial role in ensuring the adequacy of internal controls and risk management processes within an organization. With respect to the question asked:

1. The internal audit function is indeed responsible for assessing the effectiveness of management's continuous monitoring activities. This helps determine if the controls in place are operating as intended and if they are effective in mitigating risks.
2. In areas where management has proven to have effective monitoring activities, the internal audit function may opt to perform less frequent or less intensive assessments. This is because the risks would likely be lower, allowing the internal audit function to allocate their resources to higher risk areas within the organization.

It is important to note that while internal audit functions may adjust their strategies based on the effectiveness of management's own monitoring, they still maintain overall responsibility for evaluating and contributing to the improvement of governance, risk management, and control processes.