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CA Intermediate · Auditing and Ethics · Nature, Objective and Scope of Audit

Sundaram Textiles Ltd's management insists that, because the company has a strong internal audit team, the statutory auditor need not perform any procedures on the financial statements and may simply rely on the internal auditor's conclusions. Under the Standards on Auditing, what is the correct position?

The statutory auditor alone is responsible for the audit opinion. The auditor may use internal audit work after evaluating it, but that use does not reduce the auditor's responsibility or remove the need for the auditor's own procedures.

  1. AThe auditor may rely entirely on internal audit and give an opinion without own procedures, since the internal auditor is a qualified professional
  2. BThe statutory auditor has sole responsibility for the audit opinion and cannot reduce that responsibility by using the work of internal auditCorrect
  3. CThe auditor's responsibility is shared equally with the internal auditor once the work is used
  4. DThe auditor must stop using internal audit work, because SAs prohibit any use of it

Explanation

Under SA 610, even where the auditor uses the work of internal auditors, the auditor alone is responsible for the opinion and must evaluate that work. Option A is wrong because reliance cannot replace the auditor's own procedures. Option C is wrong as responsibility is not shared. Option D is wrong because the work may be used after evaluation.

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