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CA Intermediate · Auditing and Ethics · Audit Strategy, Audit Planning and Audit Programme

Mehta & Associates audits Rohit Pharma Ltd. The audit team plans to use the work of the entity's internal auditor to obtain part of the audit evidence on inventory controls. The audit manager says the use of that work reduces the engagement partner's responsibility for the audit opinion. What is the correct audit response under the Standards on Auditing?

The manager is wrong. Under SA 610, the external auditor alone is responsible for the audit opinion, and using the internal auditor's work does not reduce that responsibility. The auditor must evaluate the internal audit function's objectivity, competence and approach, whoever the internal auditor reports to.

  1. AThe statement is correct because internal audit work shares the responsibility for the opinion with the auditor
  2. BThe statement is incorrect because the external auditor has sole responsibility for the audit opinion, which is not reduced by using the internal auditor's workCorrect
  3. CThe statement is correct only if the internal auditor is a chartered accountant
  4. DThe statement is incorrect only if the internal auditor reports to the Audit Committee

Explanation

Under SA 610 (Using the Work of Internal Auditors), the external auditor has sole responsibility for the audit opinion expressed, and that responsibility is not reduced by the auditor's use of the work of internal auditors. The auditor must also evaluate the internal audit function's objectivity, competence and systematic approach. Qualification or reporting lines do not shift the responsibility.

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