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

Ganga Steel Ltd has an internal audit function that has tested inventory counts and also evaluated the going concern assumption for the group. The statutory auditor, CA Sunita, wishes to rely on this work to reduce her own procedures. Which approach is consistent with SA 610 (Revised)?

She may use the internal audit work on inventory counts after considering its nature, scope and relevance to her audit strategy and plan, but she must make the going concern evaluation herself. The external auditor has sole responsibility for the opinion and for significant judgments.

  1. ARely on the internal auditors' going concern evaluation, as they know the company best
  2. BUse the internal audit work on inventory counts after considering its nature, scope and relevance to her strategy and plan, but make the going concern evaluation herselfCorrect
  3. CRely on all internal audit work if the internal audit head is a chartered accountant
  4. DDisclose the internal auditors' work in her report and share responsibility for the opinion

Explanation

SA 610 requires the auditor to consider the nature and scope of internal audit work and its relevance to the audit strategy and plan. The auditor has sole responsibility for the opinion and must make significant judgments herself, including evaluating the appropriateness of management's use of the going concern assumption. Option 0 delegates a significant judgment.

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