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CS Professional · Compliance Management, Audit and Due Diligence · Concepts of Various Audits

Sagar Textiles Ltd, a listed company, has appointed a firm of cost accountants as its internal auditor. The audit committee asks the firm to examine whether the company's purchase approvals follow the delegation-of-authority matrix. Which description best fits the nature of this engagement?

The engagement is an internal audit. It evaluates whether purchase approvals comply with the company's internal delegation matrix, which is a control and policy compliance review carried out for management and the audit committee, unlike a statutory audit that opines on the financial statements.

  1. AA statutory audit giving an opinion on the true and fair view of financial statements
  2. BAn internal audit evaluating compliance with internal controls and policies, performed for management and the boardCorrect
  3. CA secretarial audit certifying compliance with company law
  4. DA tax audit reporting on particulars required under tax law

Explanation

Testing whether transactions follow management's own authority matrix is an evaluation of internal controls and policy compliance. This is internal audit, which serves management and the audit committee. A statutory audit expresses an opinion on financial statements and is not the purpose here.

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