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CS Professional · Internal and Forensic Audit · Reporting under Internal Audit

Sunrise Textiles Ltd's internal audit team issued a report on its Surat plant. The statutory auditor wants to rely on part of that work. According to SA 610 (Revised), what should the external auditor do first with respect to the internal audit function's reports?

The external auditor should read the internal audit function's reports relating to the work it plans to use. This helps understand the nature and extent of the procedures performed and the related findings, before deciding how far that work can be relied on for the audit.

  1. ARead the reports relating to the work the external auditor plans to use, to understand the nature and extent of procedures performed and the related findingsCorrect
  2. BAdopt the internal auditor's conclusions directly without reading the reports, since the function is part of the entity
  3. CAsk the internal auditor to re-perform all procedures before reading any report
  4. DRely only on the oral briefing given by the Chief Financial Officer

Explanation

SA 610 (Revised) says the external auditor shall read the internal audit function's reports on the work it plans to use, to understand the nature and extent of the procedures and findings. Adopting conclusions unread or relying on oral briefings skips this required step.

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