Reference no: EM133104192

Question - Drathon plc is a company applying for a listing to trade their shares on the London Stock Exchange and the management are trying to understand the need for an Internal Audit Department. The Finance Director has seen quotes from ISA 610 'Considering the work of internal audit' which says:

"The external auditor should consider the activities of internal auditing and their effect, if any, on external auditing procedures"; and

"The scope and objectives of internal auditing vary widely and depend on the size and structure of the entity and the requirements of its management".

The Finance Director has also read about the benefits of having an Audit Committee but is unsure how to set up such a committee.

The company provides assets such as cars and plant and machinery to companies in the Far East and Australia. Assets are bought from manufacturers and then supplied to customers on lease terms varying from a few days to many years.

Required -

(a) Advise the Finance Director of the effect an Internal Audit Department will have on the external auditors' audit approach and audit work.

(b) Advise the Finance Director of the activities which an Internal Audit Department might carry out in the case of Drathon plc.

(c) Advise the Finance Director of the structure and role of an Audit Committee in 'listed' public companies and the advantages and disadvantages of having one.