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CA Intermediate · Auditing and Ethics · Risk Assessment and Internal Control

CA Rohit is auditing Bharat Logistics Ltd. He wishes to rely on the work of the company's internal audit function (IAF) to obtain evidence on inventory controls at 40 depots. The IAF head reports to the Chief Financial Officer, and the function has no approved audit charter. Under SA 610, how should Rohit proceed?

Rohit should evaluate the internal audit function's objectivity, competence and systematic approach, and not use its work if these are inadequate. Reporting to the CFO and having no charter raise doubts about objectivity, and the auditor stays solely responsible for the opinion, so the work cannot be simply relied upon or delegated.

  1. AUse the IAF's work directly since it belongs to the company, with no evaluation needed
  2. BEvaluate the objectivity, competence and systematic approach of the IAF, and if these are inadequate, not use its workCorrect
  3. CDelegate the audit of inventory to the IAF and sign the report on its findings alone
  4. DUse the work only if the IAF head is a chartered accountant

Explanation

SA 610 requires the external auditor to evaluate the objectivity, competence and use of a systematic and disciplined approach by the internal audit function before using its work. Reporting to the CFO and the lack of a charter point to doubtful organisational status and objectivity. The auditor remains solely responsible for the opinion, so delegating the audit is wrong.

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