ACCA Advanced Audit and Assurance (AAA) Practice Exam

Which of the following is NOT a focus of internal audit functions?

1. Consulting activities

2. Evaluating governance processes

3. External investment performance

4. Improving risk management

The correct answer is: External investment performance

The focus of internal audit functions primarily revolves around enhancing the effectiveness of governance, risk management, and control processes within an organization. Internal auditors are tasked with providing independent assessments of the company's operations and ensuring that internal controls are functioning effectively, which helps in safeguarding assets and ensuring accuracy in financial reporting. Consulting activities, evaluating governance processes, and improving risk management are all integral components of what internal audits encompass. For instance, internal auditors might conduct consulting activities to advise on best practices or help improve processes, they evaluate governance processes to ensure that the organization adheres to laws and regulations while also fostering accountability, and they work on improving risk management by identifying potential risks and advising on strategies to mitigate those risks. On the other hand, external investment performance does not fall under the internal audit's scope. This area typically pertains to assessing the performance of investments managed outside the organization, such as funds or portfolios managed by third-party investment firms. Evaluating external investment performance is usually the responsibility of financial analysts or investment managers rather than internal auditors, as it involves a different set of objectives and expertise focused on market trends, investment strategies, and financial returns rather than the internal controls and governance of the organization itself.