Internal Economies of Scale are economies or benefits which accrue from the increase in the scale of output of an individual firm and they provide benefits to that firm alone. They are usually classified as:
(1) Technical Economies of Scale.
(2) Marketing Economies of Scale.
(3) Financial Economies of Scale.
External Economies of Scale are benefits which accrue from the growth of an industry and thus may be availed of by all firms in the industry.
1. Specialised firms establishing to support the industry.
2. Cost of research being shared among firms.
3. Higher Education Institutions delivering programmes targeted to assist employees.
4. The establishment of marketing boards and other specialized agencies to assist the industry.
- ISA 400 Risk Assessments and Internal Control deals with internal control objectives and internal controls. ISA 500 Audit Evidence deals with audit objectives and audit procedures. A proper understanding ofinternal controls is essential to auditors in order that they understand the business and are able to effectively plan and execute tests of controls and an appropriate level of substantive procedures. You are the auditor of a small manufacturing company, that pays its staff in cash and by bank transfer and Maintains its payroll on a small stand-alone computer. Required: For the payroll department, describe the:Internal control objectives that should be in place; Internal control environment and internal control procedures that should be in place to achieve the internal control objectives
- The responsibilities of external auditors are not always well understood, especially with regard to the detection and reporting of fraud. When external auditors provide non-audit services to their audit clients, it is essential that the auditors make a clear distinction between their audit and non-audit responsibilities.Required:Explain the responsibilities of external auditors to directors and shareholders