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CS Professional · Compliance Management, Audit and Due Diligence · Internal Audit and Performance Audit

CA Rao is statutory auditor of Deccan Foods Ltd. He concludes that the internal audit function's work can be used. As the next step, he considers the nature and scope of work performed or planned by internal audit. Under SA 610 (Revised), what is the first consideration, and what must he communicate to those charged with governance?

The first consideration is whether the internal audit function's nature and scope of work is relevant to the external auditor's overall audit strategy and audit plan. He must also tell those charged with governance how he plans to use that work, as part of communicating planned scope and timing.

  1. AWhether internal audit's work is relevant to his overall audit strategy and audit plan; he must communicate how he has planned to use that workCorrect
  2. BWhether internal audit staff are paid adequately; he must communicate the internal audit budget
  3. CWhether internal audit reports to management; he must communicate the internal audit findings in full
  4. DWhether internal audit covers non-financial areas; he must communicate that no reliance is placed on it

Explanation

SA 610 (Revised) gives as a first consideration whether the planned or performed nature and scope of internal audit work is relevant to the overall audit strategy and plan. When communicating the planned scope and timing of the audit under SA 260 (Revised), the external auditor must communicate how the use of internal audit work is planned.

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