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CA Final · Advanced Auditing, Assurance and Professional Ethics · Audit Planning, Strategy and Execution

Sagar Foods Ltd has a strong internal audit function. CA Nisha is considering using its work. The internal auditors have tested controls over payables, and they also evaluated management's going concern assessment and the valuation of a complex unlisted investment. Which approach is consistent with SA 610 (Revised)?

CA Nisha should make the significant judgments herself and perform more procedures directly where greater judgment is needed. Under SA 610 (Revised) she has sole responsibility for the opinion, and internal audit's work alone cannot provide sufficient appropriate evidence on areas such as going concern and estimates.

  1. ARely on internal audit's evaluation of going concern and the investment valuation, since the function is competent and objective
  2. BMake the significant judgments herself, and perform more procedures directly where greater judgment is needed, rather than rely on internal audit aloneCorrect
  3. CShare responsibility for the audit opinion with the head of internal audit, referring to this in the report
  4. DUse internal audit's work only for areas where no judgment is involved and ignore its scope in planning

Explanation

Under SA 610 (Revised) the external auditor has sole responsibility for the opinion and must make significant judgments, which include evaluating going concern and significant accounting estimates. The greater the judgment, the more procedures the auditor must perform directly. Option A therefore fails. Option C is wrong because responsibility is not shared.

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