Skip to content

CS Professional · Compliance Management, Audit and Due Diligence · Internal Audit and Performance Audit

Kaveri Textiles Ltd has an internal audit team whose head reports to the CFO, and the CFO can change the audit plan and reduce its scope at will. The team uses no documented risk assessment or work programmes. The statutory auditor is considering using this team's work. What does SA 610 (Revised) require?

The auditor must not use the team's work. SA 610 (Revised) prohibits reliance where organisational status and policies do not support objectivity, or where no systematic and disciplined approach exists. The CFO's power over scope and the absence of documented risk assessments and work programmes trigger both conditions.

  1. AUse the work, because any in-house team qualifies as an internal audit function
  2. BUse the work only for low-risk areas, since the standard permits partial reliance despite weak objectivity
  3. CNot use the work, because organisational status and policies do not adequately support objectivity and no systematic, disciplined approach is appliedCorrect
  4. DUse the work if the CFO gives a written confirmation of its quality

Explanation

The standard says the external auditor shall not use the work of the internal audit function if its organisational status and policies do not adequately support objectivity, if it lacks competence, or if it does not apply a systematic and disciplined approach. Here both objectivity and the systematic approach fail. Partial reliance in low-risk areas is not a permitted fallback once these conditions exist.

Did you get it right without looking?

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

Practise Internal Audit and Performance AuditFree diagnostic mock

More Internal Audit and Performance Audit questions