Skip to content

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

In the audit of Narmada Cement Ltd, the internal audit function has tested the going concern assumptions and the adequacy of disclosures, and its report is well documented. The statutory auditor wishes to minimise own work. Under SA 610 (Revised), which area can the auditor NOT leave to internal audit's judgment?

The auditor cannot leave the evaluation of the going concern assumption to internal audit. The external auditor has sole responsibility for the opinion and must personally make significant judgments, including going concern appropriateness, risk assessment, estimates and disclosure adequacy, under SA 610 (Revised).

  1. AEvaluating the appropriateness of management's use of the going concern assumptionCorrect
  2. BCounting of inventory at remote warehouses where the internal audit scope is relevant to the audit plan
  3. CTesting of the operating effectiveness of selected controls within the nature and scope of internal audit work
  4. DGathering information on fixed asset movements for the auditor's review

Explanation

SA 610 (Revised) says the external auditor has sole responsibility for the opinion and must make significant judgments, which include assessing risks of material misstatement, evaluating sufficiency of tests, evaluating going concern appropriateness, significant estimates and disclosure adequacy. The other tasks are factual work that can be used if relevant to the strategy and plan.

Did you get it right without looking?

One question tells you little. A timed set on Audit Planning, Strategy and Execution shows your real accuracy, how long you take and where you lose marks.

Practise Audit Planning, Strategy and ExecutionFree diagnostic mock

More Audit Planning, Strategy and Execution questions