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CS Professional · Internal and Forensic Audit · Internal Audit Engagements and Planning

The external auditor of Tapti Steels Ltd reviews the internal audit function and finds that its organisational status and policies do not adequately support the objectivity of internal auditors, and the function's competence level is low. The risk of material misstatement in inventory is also assessed as high. Which planning decision is consistent with SA 610 (Revised)?

The auditor should plan to use less of the internal audit function's work and perform more of the inventory work directly. SA 610 (Revised) points that way where risk is higher, objectivity is less supported by status and policies, and competence is lower; all three apply here.

  1. ARely heavily on the function because its work is cheaper than direct procedures
  2. BPlan to use less of the function's work and perform more of the inventory work directly, as each of these factors points that wayCorrect
  3. CUse the function's work only for low-risk areas but accept its evaluation of evidence in inventory
  4. DDisregard the factors of objectivity and competence, since only risk level matters in planning

Explanation

Para 18 of SA 610 (Revised) directs planning to use less of the work when judgment is high, risk is higher, organisational status and policies less adequately support objectivity, and competence is lower. All the facts here point the same way, so more direct work is needed. Considering only risk ignores factors (c) and (d).

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