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

Orion Steels Ltd plans to have its internal audit function test the design, implementation and operating effectiveness of controls over procurement, giving assurance to management and those charged with governance. The statutory auditor, CA Mehta, notes that the company is mid-sized with a small board. Which statement is consistent with SA 610 (Revised)?

Testing procurement controls is an internal control activity of internal audit, and its scope varies by entity. SA 610 (Revised) says objectives, scope and status depend on size, structure and the requirements of management and those charged with governance, and assurance on controls is allowed.

  1. AInternal audit objectives and scope are fixed by the standard and are the same for every entity
  2. BSuch testing of controls is activity relating to internal control, and internal audit scope varies with entity size, structure and management requirementsCorrect
  3. CInternal audit may not provide assurance on controls, only consulting advice
  4. DInternal audit scope is determined solely by the statutory auditor

Explanation

SA 610 (Revised) lists evaluation of internal control, including tests to provide assurance on design, implementation and operating effectiveness, as an internal audit activity. It also says objectives, scope and status vary widely with size, structure and the requirements of management and those charged with governance. Options A and D contradict this.

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