In a company, management is responsible for running all aspects of the entity. In theory, the broad objectives for the business will be set, for example. operating the business efficiently and effectively, the risks which threaten the objectives set will be identified, and suitable responses to the risks will be put in place. These responses will include implementing a proper information system, employing competent staff, and implementing policies and procedures, including sound control activities. Management is ultimately responsible for running all aspects of the business in an orderly and efficient manner. The objectives of the business will be set, the risks relating to achieving those objectives will be identified and suitable internal controls in the form of documents, as well as policies and procedures will be in place to address those risks. However, even the best designed internal control systems have inherent limitations. Hence the need for internal auditors to constantly assess the effectiveness of the companys internal controls among other things.

2.1. Define the term internal audit and indicate how it is relevant to a company? (8 marks)

2.2. Internal controls consist of five main components. List and explain these five main components of internal controls ? (10 marks)

2.3. Discuss the advantages/benefits of good internal controls in an organisation? (8 marks)