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CS Professional · Internal and Forensic Audit · Reporting under Internal Audit

Rajesh & Co., an external auditor, plans to rely on the internal audit report of Bharat Textiles Ltd. The finance head suggests that, because the internal auditors are employees who know the business well, the external auditor may reduce his own responsibility for the opinion. Under SA 610 (Revised), what is the correct position?

The external auditor alone is responsible for the audit opinion. SA 610 (Revised) says this responsibility is not reduced by using the work of the internal audit function or internal auditors giving direct assistance, because internal auditors are not independent of the entity as the external auditor must be.

  1. AResponsibility for the opinion is shared equally with the internal audit function
  2. BThe external auditor has sole responsibility for the opinion, and using internal audit work does not reduce itCorrect
  3. CResponsibility passes to the internal auditor if the work is documented
  4. DResponsibility is reduced in proportion to the extent of reliance placed

Explanation

SA 610 (Revised) states that the external auditor has sole responsibility for the audit opinion, and this is not reduced by using the work of the internal audit function or by direct assistance from internal auditors. Sharing or proportional reduction of responsibility is therefore wrong.

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