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CS Professional · Compliance Management, Audit and Due Diligence · Internal Audit and Performance Audit

The internal audit function of Lakshmi Retail Ltd is asked to assist in detecting fraud, to identify and evaluate significant exposures to risk, and to review the effectiveness of the financial reporting process. The Company Secretary notes these in the audit plan. Which classification is most accurate under SA 610 (Revised)?

All three belong to activities relating to risk management. SA 610 (Revised) says the function may identify and evaluate significant risk exposures, contribute to improving risk management and internal control including the financial reporting process, and perform procedures to assist in detecting fraud.

  1. AAll three are activities relating to risk managementCorrect
  2. BFraud detection is governance, risk exposure is control, financial reporting is compliance
  3. CAll three are activities relating to governance
  4. DOnly the risk exposure evaluation is within scope; fraud detection is prohibited

Explanation

Under activities relating to risk management, SA 610 (Revised) says the function may assist by identifying and evaluating significant exposures to risk and contributing to improving risk management and internal control, including effectiveness of the financial reporting process, and may perform procedures to assist in fraud detection. All three therefore sit under risk management. Fraud detection is not prohibited.

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