ACCA Advanced Audit and Assurance (AAA) Practice Exam

What does the internal audit function aim to improve within an entity?

1. The volume of transactions processed

2. The effectiveness of governance and risk management

3. The speed of financial reporting

4. The number of audits performed annually

The correct answer is: The effectiveness of governance and risk management

The internal audit function plays a crucial role in enhancing the effectiveness of governance and risk management within an entity. This is because internal auditors evaluate the processes and controls that are in place to ensure that the organization is operating efficiently and effectively, while also adhering to relevant laws and regulations. By assessing risk management practices, internal auditors help identify potential risks and vulnerabilities, enabling the organization to implement strategies to mitigate those risks. Furthermore, they review governance structures to ensure that the organization is operating under best practices and making informed decisions that align with its objectives. This holistic approach not only supports compliance but also contributes to improved organizational performance and accountability. In contrast, while processing a higher volume of transactions, increasing the speed of financial reporting, or performing a greater number of audits might have operational advantages, they do not directly address the core objectives that internal audit seeks to achieve in enhancing governance and risk management practices. Thus, the focus of the internal audit function is fundamentally aligned with improving the overall governance framework and the organization's approach to managing risk.