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ACCA Strategic Professional · Strategic Business Leader · Audit and compliance

Corvane Retail's external auditor is planning the year-end audit. The internal audit function is well resourced, reports to the audit committee and has completed testing of inventory controls across 40 stores. Which approach by the external auditor is most consistent with good practice?

The external auditor should assess internal audit's objectivity and competence and, if satisfied, use its work to adjust the nature, timing or extent of procedures. The auditor keeps sole responsibility for the opinion, so cannot rely fully on or delegate to internal audit.

  1. ARely fully on internal audit's conclusions and perform no further inventory work
  2. BIgnore internal audit's work because the auditor must be fully independent
  3. CEvaluate the objectivity and competence of internal audit and, if satisfactory, use its work while retaining sole responsibility for the audit opinionCorrect
  4. DDelegate the audit opinion on inventory to the head of internal audit

Explanation

The external auditor may use internal audit's work after assessing its objectivity, competence and quality, and performing some procedures on it. Responsibility for the opinion cannot be shared or delegated, so full reliance or delegation is wrong, and ignoring the work wastes useful evidence.

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