正确答案:(a)Roleofinternalandexternalauditors–differencesObjectivesThemainobjectiveofinternalauditistoimproveacompany’soperations,primarilyintermsofvalidatingtheefficiencyandeffectivenessoftheinternalcontrolsystemsofacompany.Themainobjectiveoftheexternalauditoristoexpressanopiniononthetruthandfairnessofthefinancialstatements,andotherjurisdictionspecificrequirementssuchasconfirmingthatthefinancialstatementscomplywiththereportingrequirementsincludedinlegislation.ReportingInternalauditreportsarenormallyaddressedtotheboardofdirectors,orotherpeoplechargedwithgovernancesuchastheauditcommittee.Thosereportsarenotpubliclyavailable,beingconfidentialbetweentheinternalauditorandtherecipient.Externalauditreportsareprovidedtotheshareholdersofacompany.Thereportisattachedtotheannualfinancialstatementsofthecompanyandisthereforepubliclyavailabletotheshareholdersandanyreaderofthefinancialstatements.ScopeofworkTheworkoftheinternalauditornormallyrelatestotheoperationsoftheorganisation,includingthetransactionprocessingsystemsandthesystemstoproducetheannualfinancialstatements.Theinternalauditormayalsoprovideotherreportstomanagement,suchasvalueformoneyauditswhichexternalauditorsrarelybecomeinvolvedwith.Theworkoftheexternalauditorrelatesonlytothefinancialstatementsoftheorganisation.However,theinternalcontrolsystemsoftheorganisationwillbetestedastheseprovideevidenceonthecompletenessandaccuracyofthefinancialstatements.RelationshipwithcompanyInmostorganisations,theinternalauditorisanemployeeoftheorganisation,whichmayhaveanimpactontheauditor’sindependence.However,insomeorganisationstheinternalauditfunctionisoutsourced.Theexternalauditorisappointedbytheshareholdersofanorganisation,providingsomedegreeofindependencefromthecompanyandmanagement.(b)BenefitsofauditcommitteeinConoyCoAssistancewithfinancialreporting(nofinanceexpertise)TheexecutivedirectorsofConoyCodonotappeartohaveanyspecificfinancialskills–asthefinancialdirectorhasrecentlyleftthecompanyandhasnotyetbeenreplaced.ThismaymeanthatfinancialreportinginConoyCoislimitedorthattheothernon-financialdirectorsspendasignificantamountoftimekeepinguptodateonfinancialreportingissues.AnauditcommitteewillassistConoyCobyprovidingspecialistknowledgeoffinancialreportingonatemporarybasis–atleastoneofthenewappointeesshouldhaverelevantandrecentfinancialreportingexperienceundercodesofcorporategovernance.ThiswillallowtheexecutivedirectorstofocusonrunningConoyCo.EnhanceinternalcontrolsystemsTheboardofConoyCodonotnecessarilyunderstandtheworkoftheinternalauditor,ortheneedforcontrolsystems.ThismeansthatinternalcontrolwithinConoyComaybeinadequateorthatemployeesmaynotrecognisetheimportanceofinternalcontrolsystemswithinanorganisation.TheauditcommitteecanraiseawarenessoftheneedforgoodinternalcontrolsystemssimplybybeingpresentinConoyCoandbyeducatingtheboardontheneedforsoundcontrols.Improvingtheinternalcontrol‘climate’willensuretheneedforinternalcontrolsisunderstoodandreducecontrolerrors.RelianceonexternalauditorsConoyCo’sinternalauditorscurrentlyreporttotheboardofConoyCo.Aspreviouslynoted,thelackoffinancialandcontrolexpertiseontheboardwillmeanthatexternalauditorreportsandadvicewillnotnecessarilybeunderstood–andtheboardmayrelytoomuchonexternalauditorsIfConoyCoreporttoanauditcommitteethiswilldecreasethedependenceoftheboardontheexternalauditors.Theauditcommitteecantaketimetounderstandtheexternalauditor’scomments,andthenviathenon-executivedirector,ensurethattheboardtakeactiononthosecomments.AppointmentofexternalauditorsAtpresent,theboardofConoyCoappointtheexternalauditors.Thisraisesissuesofindependenceastheboardmaybecometoofamiliarwiththeexternalauditorsandsoappointonthisfriendshipratherthanmerit.Ifanauditcommitteeisestablished,thenthiscommitteecanrecommendtheappointmentoftheexternalauditors.Thecommitteewillhavethetimeandexpertisetoreviewthequalityofserviceprovidedbytheexternalauditors,removingtheindependenceissue.Corporategovernancerequirements–bestpracticeConoyCodonotneedtofollowcorporategovernancerequirements(thecompanyisnotlisted).However,notfollowingthoserequirementsmaystarttohaveadverseeffectsonConoy.Forexample,ConoyCo’sbankisalreadyconcernedaboutthelackoftransparencyinreporting.EstablishinganauditcommitteewillshowthattheboardofConoyCoarecommittedtomaintainingappropriateinternalsystemsinthecompanyandprovidingthestandardofreportingexpectedbylargecompanies.Obtainingthenewbankloanshouldalsobeeasierasthebankwillbesatisfiedwithfinancialreportingstandards.Givennonon-executives–independentadvicetoboardCurrentlyConoyCodoesnothaveanynon-executivedirectors.Thismeansthatthedecisionsoftheexecutivedirectorsarenotbeingchallengedbyotherdirectorsindependentofthecompanyandwithlittleornofinancialinterestinthecompany.Theappointmentofanauditcommitteewithonenon-executivedirectorontheboardofConoyCowillstarttoprovidesomenon-executiveinputtoboardmeetings.Whilenotsufficientintermsofcorporategovernancerequirements(aboutequalnumbersofexecutiveandnon-executivedirectorsareexpected)itdoesshowtheboardofConoyCoareattemptingtoestablishappropriategovernancesystems.AdviceonriskmanagementFinally,thereareothergeneralareaswhereConoyCowouldbenefitfromanauditcommittee.Forexample,lackofcorporategovernancestructuresprobablymeansConoyCodoesnothaveariskmanagementcommittee.Theauditcommitteecanalsoprovideadviceonriskmanagement,helpingtodecreasetheriskexposureofthecompany.