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CS Professional · Internal and Forensic Audit · Internal Audit Engagements and Planning

Rohan & Co., external auditors, review the working papers and work programme of the internal audit function of Kaveri Textiles Ltd. and also make inquiries of internal audit staff and observe some of their procedures. What is the purpose of these steps?

These steps (inquiry, observation and review of the work programme and working papers) are performed to evaluate the quality of the internal audit function's work and the conclusions reached, so the external auditor can decide how far that work can be relied upon.

  1. ATo evaluate the quality of the internal audit function's work and the conclusions it reachedCorrect
  2. BTo transfer responsibility for the audit opinion to the internal audit function
  3. CTo replace the need for any assessment of the internal auditors' competence
  4. DTo satisfy the requirement of obtaining written representations from management

Explanation

Under SA 610 (Revised), procedures to determine the adequacy of internal audit work include making inquiries of appropriate individuals, observing procedures performed, and reviewing the work programme and working papers (in addition to reperformance). Their aim is to evaluate quality and conclusions. The option on transferring responsibility is wrong because the external auditor retains all significant judgments.

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