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CS Professional · Internal and Forensic Audit · Reporting under Internal Audit

Ganga Foods Ltd's internal auditors tested the operating effectiveness of controls over procurement and observed year-end inventory counts. Under SA 610 (Revised), how may such work be treated by the external auditor?

Testing the operating effectiveness of controls and observing inventory counts are listed examples of internal audit function work that the external auditor can use, subject to the evaluation of adequacy. The standard places no restriction to subsidiaries only or to a one-month reporting deadline.

  1. AIt is an example of internal audit work that can be used by the external auditorCorrect
  2. BIt can never be used because only external auditors may test controls
  3. CIt can be used only for subsidiaries, not for the parent
  4. DIt can be used only if the report is issued within a month of year end

Explanation

SA 610 (Revised) lists testing operating effectiveness of controls and observations of inventory counts among examples of internal audit work that can be used. The other options impose restrictions not found in the text.

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