Skip to content

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

Orion Foods Ltd's statutory auditor finds that, for the inventory valuation area, the assessed risk of material misstatement is significant and substantial judgment is needed in evaluating evidence. The internal audit function reports to the CFO and its staff have limited competence. How should the auditor plan the use of its work under SA 610 (Revised)?

The auditor should plan to use less of the internal audit work and perform more directly. SA 610 (Revised) requires this where judgment is high, assessed risk is significant, organizational status weakly supports objectivity and competence is low, and all four apply here.

  1. APlan to use less of the function's work and perform more of the work directlyCorrect
  2. BUse more of the work because internal audit knows the business well
  3. CUse the work fully if the CFO certifies its accuracy
  4. DUse the work for judgmental areas but test routine areas directly

Explanation

The auditor must plan to use less of the work and do more directly when more judgment is involved, the assessed risk is higher (especially significant risks), objectivity support is weaker, and competence is lower. All four conditions apply here. Option 4 reverses the logic.

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