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CA Intermediate · Auditing and Ethics · Audit Strategy, Audit Planning and Audit Programme

Sagar Pharma Ltd is a continuing audit client of CA Nandini. While planning this year's audit, she wants to use the work of the company's internal auditor for testing certain inventory-count controls. Which approach is consistent with SA 300 and the related Standards?

She should evaluate the internal auditor's competence, objectivity and quality of work before deciding how far to rely on it. Even then, she alone remains responsible for the audit opinion, so she cannot hand over the opinion or cite the internal auditor as reducing her responsibility.

  1. APlan to use the internal auditor's work fully without evaluating competence or objectivity, since internal audit is part of the entity
  2. BEvaluate the internal auditor's competence, objectivity and the quality of the work, and then decide the extent of reliance, remaining solely responsible for the audit opinionCorrect
  3. CDelegate the audit opinion on inventory to the internal auditor, as the work is specialised
  4. DDisclose in the audit report that the internal auditor reduced her responsibility for inventory

Explanation

The auditor may use the internal auditor's work only after evaluating objectivity, competence and quality of work, with the extent of use planned accordingly. The auditor remains solely responsible for the opinion and cannot reduce that responsibility by referring to it in the report. Full unevaluated reliance is therefore wrong.

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