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CS Professional · Internal and Forensic Audit · Internal Audit: Introduction and Overview

Gupta Logistics Ltd's statutory auditor places reliance on certain internal controls tested by the internal audit team, but still performs own tests on key balances. What principle does this illustrate?

The statutory auditor may use and rely on internal audit work after assessing its objectivity and competence, but the responsibility for the audit opinion rests solely with the statutory auditor and cannot be transferred or shared.

  1. AThe statutory auditor may consider the work of internal audit but remains solely responsible for the audit opinionCorrect
  2. BThe statutory auditor can transfer responsibility for the opinion to the internal auditor
  3. CThe internal auditor becomes jointly liable for the audit opinion
  4. DThe statutory auditor must ignore all internal audit work

Explanation

Standards allow the external auditor to use internal audit work after evaluating its objectivity and competence, but responsibility for the opinion cannot be shared or delegated. Ignoring the work entirely is not required, and the internal auditor does not sign the opinion.

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