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

Meridian Textiles Ltd, a listed company, has an internal audit function. Its statutory auditor wants to rely on the internal audit work for the year's audit. As per SA 610 (Revised), which set of matters must the statutory auditor evaluate first to decide whether the work can be used?

The statutory auditor must evaluate the internal audit function's organizational status and policies supporting objectivity, its level of competence, and whether it applies a systematic and disciplined approach including quality control. These three criteria decide if its work can be used for the audit.

  1. AThe internal audit function's organizational status and policies supporting objectivity, its level of competence, and whether it applies a systematic and disciplined approach including quality controlCorrect
  2. BThe number of branches covered by internal audit, the fee paid to the internal auditor, and the size of the audit committee
  3. CThe tenure of the internal auditor, the company's turnover, and the number of directors on the board
  4. DWhether internal audit reports directly to the promoters, the company's profit after tax, and the credit rating

Explanation

SA 610 (Revised) requires the external auditor to evaluate objectivity (organizational status and policies), competence, and a systematic and disciplined approach including quality control. The other options list matters that are not the evaluation criteria in the standard.

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