CS Professional · Compliance Management, Audit and Due Diligence · Internal Audit and Performance Audit
Auditor CA Nisha assesses that Orion Steels Ltd has a significant risk of material misstatement in inventory valuation, involving considerable judgment. The internal audit function is of moderate competence and reports to the CFO. How should she plan the use of its work in that area?
She should plan to use less of the internal audit work and perform more of the work directly. SA 610 (Revised) requires this where judgment is high, assessed risk of material misstatement is higher or significant, objectivity support is weaker, or competence is lower. Several apply here.
- APlan to use more of its work, since the function exists and has been tested before
- BPlan to use less of its work and perform more of the work directlyCorrect
- CUse it fully, provided she signs off on the internal audit report
- DUse it fully, but only if inventory is below materiality
Explanation
The standard says the auditor should plan to use less of the function's work and perform more directly when more judgment is involved, risk of material misstatement is higher (especially significant risks), organizational status supports objectivity less, or competence is lower. Here several factors point to this. Increasing reliance is the reverse of the requirement.
Did you get it right without looking?
One question tells you little. A timed set on Internal Audit and Performance Audit shows your real accuracy, how long you take and where you lose marks.
More Internal Audit and Performance Audit questions
- Kaveri Pharma Ltd's management directs its internal audit team to plan and perform tests on the design, implementation and operating effecti…
- Sagar Logistics Ltd asks its statutory auditor, CA Neha Kulkarni, to also take on the company's internal audit assignment and use the result…
- Mahesh & Co., external auditors of Bharat Cement Ltd, want to judge whether the internal audit function applies a systematic and disciplined…
- Orion Steels Ltd plans to have its internal audit function test the design, implementation and operating effectiveness of controls over proc…
- Before relying on the internal audit function of Kaveri Pharma Ltd, the external auditor evaluates it. Which set of matters must the auditor…
- Before relying on the internal audit work at Bharat Steels Ltd, the statutory auditor plans a meeting with the internal audit head to coordi…