Chapter 21, Problem 1RQ

To determine

Explain internal auditing.

Explanation of Solution

Internal auditing:

Internal auditing is a process of providing assurance related to the fair and accurate representation of the financial statements of the company. It is an intra-company service. Internal auditing is a function of the management of the company. Internal auditing provides assurance regarding the compliance of the company policies. The objective of the internal auditing is to control and manage the activities in order to achieve the objective of the company. Company appoints an internal auditor from the staff of the company who is responsible for all the activities of the internal control and is answerable to the management.

Thus, internal auditing is an intracompany activity that provides and checks the fair and accurate representation of the financial statements of the company.