CA Final · Advanced Auditing, Assurance and Professional Ethics · Audit Planning, Strategy and Execution

CA Arjun audits Deccan Infra Ltd, which has significant fair value estimates for unquoted investments and complex valuation models. Internal audit has tested the valuation spreadsheets' arithmetic and offers its report. Arjun considers relying entirely on it for the evaluation of significant accounting estimates and the adequacy of related disclosures. What is the correct conclusion under SA 610 (Revised)?

He cannot rely on internal audit alone. Evaluating significant accounting estimates and the adequacy of disclosures are significant judgments for the external auditor, who has sole responsibility for the opinion. The greater the judgment involved, the more procedures he must perform directly.

1. AHe may rely entirely on internal audit because it tested the spreadsheets
2. BHe may rely entirely only if the audit committee approves
3. CHe cannot rely on it alone; evaluating significant accounting estimates and disclosure adequacy are significant judgments he must make himself, with more procedures performed directly as judgment increasesCorrect
4. DHe may delegate the evaluation to internal audit but must disclose this in the audit report