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

Sagar Logistics Ltd asks its statutory auditor, CA Neha Kulkarni, to also take on the company's internal audit assignment and use the results in the statutory audit. What does the official text of SA 610 (Revised) indicate?

The arrangement is not acceptable. SA 610 (Revised) explains that a self-review threat arises, and the Code of Ethics states a statutory auditor cannot be the entity's internal auditor because an independent and objective opinion would not be possible. Committee approval or separate staff does not cure this.

  1. AA self-review threat arises, and the Code of Ethics states a statutory auditor cannot be the entity's internal auditorCorrect
  2. BThe arrangement is permitted if the audit committee approves it
  3. CThe arrangement is permitted if separate staff are used for each assignment
  4. DIt is allowed provided the internal audit fee is disclosed in the report

Explanation

The text notes a self-review threat when the external auditor provides internal audit services whose results are used in the audit, and cites the Code of Ethics: a statutory auditor cannot be its internal auditor as independent and objective opinion would not be possible. The other options add safeguards the text does not give for this case.

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