Question 1 (PAST YEAR Q)-15m

(a)Compare and contrast the differences between internal and external auditing (25marks)(Please provide a table)

(b)William Windsor Co has a sales income of $253 million and employs 1,200 people in 15 different locations. William Windsor Co provides various financial services from pension and investment advice to individuals, to maintaining cash books and cash forecasting in small to medium-sized companies. The company is owned by six shareholders, who belong to the same family; it is not listed on any stock-exchange and the shareholders have no intention of applying for a listing. However, an annual audit is required by statute and additional regulation of the financial services sector is expected in the near future. Most employees are provided with on-line, real-time computer systems, which present financial and stock market information to enable the employees to provide up-to-date advice to their clients. Accounting systems record income, which is based on fees generated from investment advice. Expenditure is mainly fixed, being salaries, office rent, lighting and heating, etc. Internal control systems are limited; the directors tending to trust staff and being more concerned with making profits than implementing detailed controls. Four of the shareholders are board members, with one member being the chairman and chief executive officer. The financial accountant is not qualified, although has many years' experience in preparing financial statements.

Required:

Provide your arguments if there is a need of establishing an internal audit department or outsource the department in the situation above. (25marks)(elaborate and explanation needed)