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

The statutory auditor of Rohini Foods Ltd proposes the following: (i) use internal audit's testing of operating effectiveness of controls; (ii) let the internal audit function decide whether the going concern assumption is appropriate and reflect it in the audit opinion. Under SA 610 (Revised), which is correct?

Using internal audit's testing of operating effectiveness of controls is an example of usable work, but evaluating the going concern assumption is a significant judgment the external auditor must make personally. The external auditor alone bears responsibility for the opinion, so that judgment cannot be passed to internal audit.

  1. ABoth can be delegated, if the internal auditors are competent
  2. BNeither can be used, as internal audit work is never relevant
  3. C(i) is an example of work that can be used, but (ii) is a significant judgment the external auditor must makeCorrect
  4. D(ii) can be used, but (i) cannot, because controls testing is a significant judgment

Explanation

Testing the operating effectiveness of controls is listed as work of the internal audit function that may be used. Evaluating the appropriateness of management's use of the going concern assumption is listed as a significant judgment for the external auditor, who has sole responsibility for the opinion.

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