50+ Internal Auditor Interview Questions and Answers for Freshers

Clients expect consultancy firms to provide expertise, objectivity, efficiency, and value in internal audit services.

• Expertise in industry best practices and regulations

• Objectivity in assessing risks and controls

• Efficiency in conducting audits and delivering timely reports

• Value in providing actionable recommendations for improvement

• Examples: detailed audit plans, thorough risk assessments, clear communication of findings

Key risk areas for an internal auditor include fraud, compliance, operational, financial, and cybersecurity risks.

• Fraud risk: Misappropriation of assets, financial statement fraud, corruption.

• Compliance risk: Failure to comply with laws and regulations, industry standards.

• Operational risk: Inefficiencies, errors, lack of internal controls.

• Financial risk: Mismanagement of funds, inaccurate financial reporting.

• Cybersecurity risk: Data breaches, hacking, ransomware attacks.

Financial statements provide a snapshot of a company's financial health, including assets, liabilities, and equity. Trial balances ensure accuracy of financial records.

• Financial statements serve to provide stakeholders with an overview of a company's financial performance and position.

• Components of financial statements include balance sheet, income statement, cash flow statement, and statement of changes in equity.

• Balance sheet shows assets, liabilities, and equity at a speci...read more

Test of effectiveness and design is a process used to evaluate the efficiency and adequacy of controls in place.

• Test of effectiveness assesses whether controls are operating as intended.

• Test of design evaluates the adequacy of controls to address risks.

• Examples include testing the effectiveness of access controls by attempting unauthorized access, and testing the design of segregation of duties controls by reviewing job responsibilities.

• Results of these tests help identify we...read more

The Wages Bill Amendment Act is a law that regulates the payment of wages to workers in India.

• The act was first introduced in 1948 and has been amended several times since then.

• The latest amendment was made in 2017 and introduced the concept of a 'universal minimum wage'.

• The amendment also made it mandatory for employers to pay wages electronically, unless the employee requests otherwise.

• The act covers all workers in India, including those in the organized and unorganized sec...read more

Various factors such as changes in regulations, technology, business processes, and personnel can affect the design and operating effectiveness of controls.

• Changes in regulations can impact the design and operating effectiveness of controls by requiring updates to comply with new laws or standards.

• Advancements in technology may render existing controls obsolete or ineffective, necessitating enhancements or replacements.

• Changes in business processes can affect the relevance an...read more

Depreciation is the allocation of the cost of a tangible asset over its useful life. Land does not depreciate.

• Depreciation is a non-cash expense that reflects the decrease in value of an asset over time.

• It is calculated using methods such as straight-line, double declining balance, or units of production.

• Land is not depreciated because it is considered to have an indefinite useful life.

• Journal entries for depreciation involve debiting Depreciation Expense and crediting Accumu...read more

BRS is bank reconciliation statement, accounting entry is a record of financial transaction, audit is an independent examination of financial records, internal control is a process to ensure efficient and effective operations.

• BRS is prepared to reconcile the bank balance as per the bank statement with the balance as per the company's books

• Accounting entry is a record of financial transaction that shows the debit and credit aspects of the transaction

• Audit is an independent exa...read more

Fixed, regular, permanent, and contractual types of employment defined.

• Fixed type employment refers to a job with a predetermined end date.

• Regular type employment is a job with no predetermined end date and is ongoing.

• Permanent type employment is a job that is expected to last indefinitely.

• Contractual type employment is a job that is based on a specific contract or agreement.

• Examples of fixed type employment include seasonal work or project-based work.

• Examples of regular type...read more

Assertions are the representations by management in financial statements regarding the accuracy and completeness of information.

• Assertions include existence, completeness, rights and obligations, valuation or allocation, and presentation and disclosure.

• Existence - assets and liabilities exist at a given date

• Completeness - all transactions and accounts that should be included are included

• Rights and obligations - entity has legal rights to assets and liabilities

• Valuation or all...read more

Ratios are used to analyze financial performance and efficiency of a company.

• Profit Margin: Net income divided by total revenue, shows how much profit a company makes for every dollar of sales.

• Current Ratio: Current assets divided by current liabilities, measures a company's ability to pay its short-term obligations.

• Debt-to-Equity Ratio: Total debt divided by total equity, indicates the proportion of debt used to finance a company's assets.

• Return on Investment (ROI): Net prof...read more

The type of auditing being done is likely internal auditing, focusing on evaluating and improving the effectiveness of risk management, control, and governance processes within the organization.

• Internal auditing involves assessing and improving the effectiveness of risk management, control, and governance processes within an organization.

• It helps in identifying areas of improvement and ensuring compliance with policies and regulations.

• Examples of internal auditing activities ...read more

Find the second largest element in an array

• Sort the array in descending order

• Return the element at index 1

Yes, GST is applicable on electricity.

• GST is applicable on the supply of goods and services, including electricity.

• Electricity is classified as a 'goods' under GST.

• GST rates on electricity vary depending on the type of consumer and the state.

• For example, residential consumers may have a lower GST rate compared to commercial consumers.

Knowledge of financial systems, risk management, and Toyota's business operations is important for an internal auditor at Toyota Financial Services.

• Understanding of financial systems and processes

• Knowledge of risk management principles and practices

• Familiarity with Toyota's business operations and industry

• Ability to analyze and interpret financial data

• Strong communication and interpersonal skills

• Attention to detail and ability to identify potential risks or fraud

• Understanding...read more

GST is not applicable on certain products.

• Basic groceries such as fruits, vegetables, milk, and bread

• Education services

• Healthcare services

• Public transportation

• Postal services

• Exported goods and services

The purpose of audit is to provide an independent assessment of an organization's financial statements or processes to ensure accuracy, compliance, and efficiency.

• Ensuring accuracy of financial statements

• Evaluating compliance with laws and regulations

• Identifying areas for improvement in processes and controls

• Providing assurance to stakeholders

• Detecting and preventing fraud or errors

• Enhancing transparency and accountability

• Examples: financial audit, operational audit, complian...read more

Risks are potential events that could negatively impact an organization, while controls are measures put in place to mitigate those risks.

• Risks are uncertainties that could lead to financial loss, operational disruption, or reputational damage.

• Controls are policies, procedures, and practices implemented to reduce the likelihood or impact of identified risks.

• Examples of risks include fraud, cybersecurity threats, regulatory non-compliance, and natural disasters.

• Examples of con...read more

I have experience in auditing financial statements and internal controls.

• Auditing financial statements to ensure accuracy and compliance with accounting standards

• Evaluating internal controls to identify weaknesses and recommend improvements

• Testing transactions to verify their validity and completeness

• Preparing audit reports to communicate findings and recommendations

• Working with clients to address any issues or concerns

• Staying up-to-date with changes in accounting and auditin...read more

I maintain open communication, try to understand their perspective, and find common ground.

• Maintain open communication and express concerns calmly

• Try to understand their perspective and empathize with their concerns

• Find common ground and work towards a mutually beneficial solution

• Seek assistance from a supervisor or mediator if necessary

Reverse a linked list

• Iteratively swap the next and previous pointers of each node

• Use three pointers to keep track of the current, previous, and next nodes

• Update the head pointer to the last node after reversing

ISOs are international standards that provide guidelines and requirements for various industries.

• ISO 9001: Quality Management System

• ISO 14001: Environmental Management System

• ISO 27001: Information Security Management System

• ISO 45001: Occupational Health and Safety Management System

• ISO 50001: Energy Management System

The main role of an internal auditor is to assess and evaluate an organization's internal controls, processes, and procedures to ensure compliance and identify areas for improvement.

• Assessing and evaluating internal controls, processes, and procedures

• Ensuring compliance with laws, regulations, and company policies

• Identifying areas for improvement and making recommendations

• Conducting risk assessments and audits

• Providing assurance to management and stakeholders

• Detecting and pre...read more

Internal Audit is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations.

• Internal Audit evaluates the effectiveness of risk management, control, and governance processes within an organization.

• It helps identify areas of improvement and provides recommendations for enhancing internal controls.

• Internal Audit helps ensure compliance with laws, regulations, and internal policies.

• It plays a crucial role in detecti...read more

Internal audit is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations.

• Internal audit evaluates the effectiveness of an organization's risk management, control, and governance processes.

• It provides recommendations for improvement and helps organizations achieve their objectives.

• Internal auditors are responsible for assessing the accuracy of financial statements and ensuring compliance with laws and regulati...read more

Types of internal audit include financial audit, operational audit, compliance audit, and IT audit.

• Financial audit focuses on financial statements and accounting processes.

• Operational audit evaluates the efficiency and effectiveness of operations.

• Compliance audit ensures adherence to laws, regulations, and internal policies.

• IT audit assesses the organization's information technology systems and controls.

There are several types of wages act depending on the country and region.

• Wages act varies from country to country

• In India, there are several wages act such as Minimum Wages Act, Payment of Wages Act, etc.

• In the United States, the Fair Labor Standards Act (FLSA) is the primary federal law governing wages and hours of work.

• Other countries may have their own specific wages act.

Internal audit is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations.

• Internal audit provides an independent and objective evaluation of an organization's operations, including its internal control systems.

• It helps organizations identify areas of risk and opportunities for improvement.

• Internal audit can also provide consulting services to help organizations improve their operations and achieve their object...read more

Target costing is a cost management technique used to determine the maximum cost of a product based on customer demand and profit margins.

• It involves setting a target cost for a product before it is developed.

• The target cost is determined by subtracting the desired profit margin from the expected selling price.

• The cost of production is then managed to ensure that it does not exceed the target cost.

• This technique helps companies to design products that are profitable and meet ...read more

The golden rule of accounting states that debit what comes in and credit what goes out.

• Debit what comes in and credit what goes out

• Assets = Liabilities + Equity

• Helps maintain the balance in financial statements

Target costing derives the cost at which a product must be manufactured to generate a desired profit margin.

• Target costing is a cost management tool used in product development.

• It involves determining the maximum cost that can be incurred for a product to be profitable.

• The target cost is then derived by subtracting the desired profit margin from the expected selling price.

• The target cost is used as a benchmark for the product development team to design and manufacture the pro...read more

Controls in internal audit refer to measures put in place to ensure compliance, accuracy, and reliability of financial reporting.

• Preventive controls

• Detective controls

• Corrective controls

• IT controls

• Physical controls

• Segregation of duties

• Authorization and approval

• Reconciliation and review

• Documentation and record-keeping

I chose the audit domain due to my strong analytical skills and attention to detail.

• Enjoy analyzing data and identifying patterns

• Have a keen eye for detail and accuracy

• Interested in ensuring compliance and improving processes

• Value the importance of risk management and internal controls

Gold is a chemical element with the symbol Au and atomic number 79.

• Gold is a highly sought-after precious metal.

• It is known for its bright yellow color and luster.

• Gold is a good conductor of electricity and is used in electronics.

• It is also used in jewelry, coins, and as a store of value.

• Gold is often mined from the earth and can be found in various forms such as nuggets, flakes, and dust.

The Gstr-3b due date is the deadline for filing the monthly summary return for GST.

• The Gstr-3b due date is usually the 20th of the following month.

• For example, if you are filing for the month of January, the due date would be February 20th.

• Failure to file Gstr-3b by the due date may result in penalties.

Audits in different industries vary based on regulations, risks, and specific industry practices.

• Regulations: Each industry has its own set of regulations that auditors must adhere to.

• Risks: The risks faced by companies in different industries vary, impacting the focus of audits.

• Industry practices: Auditors need to understand the specific practices and processes of each industry to effectively conduct audits.

• Examples: Financial audits in the banking industry focus on complian...read more

I have over 5 years of experience in internal audit, conducting risk assessments, testing controls, and providing recommendations for improvement.

• Conducted risk assessments to identify potential areas of concern

• Tested controls to ensure compliance with policies and procedures

• Provided recommendations for improvement to enhance operational efficiency

• Collaborated with various departments to address audit findings

• Utilized audit software to streamline processes and improve accurac...read more

Cross contamination refers to the transfer of harmful substances or microorganisms from one object or surface to another.

• Cross contamination can occur in various settings, such as in food preparation, healthcare facilities, or laboratories.

• Examples of cross contamination include using the same cutting board for raw meat and vegetables without proper cleaning, leading to the spread of bacteria.

• In healthcare, cross contamination can happen when healthcare professionals fail to ...read more

Negative list of GST includes goods and services that are exempted from GST.

• Goods and services that are not subject to GST

• Examples include alcohol for human consumption, petroleum products, and electricity

• These items are not eligible for input tax credit

Non-Banking Financial Company

• NBFC stands for Non-Banking Financial Company

• They are financial institutions that provide banking services without meeting the legal definition of a bank

• Examples include Bajaj Finance, Muthoot Finance, and L&T Finance Holdings

Auditing is the process of evaluating an organization's financial records, internal controls, and compliance with regulations.

• Auditing involves examining financial statements and records to ensure accuracy and compliance.

• It also includes assessing internal controls to prevent fraud and errors.

• Auditors provide independent and objective assessments to help improve processes and ensure transparency.

• Examples include financial audits, operational audits, and compliance audits.

Cash flow is the movement of money in and out of a business, showing how much cash is generated or spent over a specific period of time.

• Cash flow is crucial for assessing a company's financial health and liquidity.

• Positive cash flow means more money is coming in than going out, while negative cash flow indicates the opposite.

• Examples of cash flow include revenue from sales, operating expenses, investments, and financing activities.

Audit is a systematic and independent examination of an organization's financial and operational records.

• Audit is conducted to ensure compliance with laws and regulations

• It helps identify areas of improvement in the organization's processes

• Auditors provide recommendations to management for enhancing controls and reducing risks

• Examples of audits include financial audits, operational audits, and IT audits

The work in progress formula calculates the value of unfinished goods or services in production.

• The work in progress formula is: Beginning WIP + Manufacturing Costs - Ending WIP

• Beginning WIP is the value of unfinished goods at the start of the accounting period

• Manufacturing Costs include direct materials, direct labor, and overhead costs

• Ending WIP is the value of unfinished goods at the end of the accounting period

Risks in banking industry include credit risk, market risk, operational risk, and regulatory risk.

• Credit risk: the risk of borrowers defaulting on loans

• Market risk: the risk of financial losses due to changes in market conditions

• Operational risk: the risk of losses due to internal processes, people, and systems

• Regulatory risk: the risk of non-compliance with regulations and laws

The 7 QC tools for auditing are essential techniques used for quality control and improvement in auditing processes.

• Check sheets: Used to collect and analyze data in a systematic manner.

• Histograms: Visual representation of data distribution to identify patterns and trends.

• Pareto charts: Helps prioritize issues by showing the most significant factors affecting quality.

• Cause-and-effect diagrams: Identify root causes of problems by mapping out potential causes.

• Scatter diagrams: ...read more

Understanding the entity's internal control environment is a crucial aspect of audit.

• Assessing the effectiveness of internal controls

• Identifying and evaluating risks

• Testing compliance with policies and procedures

• Ensuring accuracy and reliability of financial information

• Providing recommendations for improvement