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CMA Intermediate · Corporate Accounting and Auditing · Audit Report and Reporting under CARO

Under CARO 2020 clause 3(xiv), the auditor reports on the internal audit system. Which pair of matters must be covered?

The auditor reports whether the company has an internal audit system commensurate with the size and nature of its business, and whether the internal auditors' reports for the period under audit were considered by the statutory auditor, as clause 3(xiv) provides.

  1. AWhether the internal audit system is commensurate with size and nature of business, and whether internal auditors' reports for the period were considered by the statutory auditorCorrect
  2. BWhether internal auditors are chartered accountants, and whether they report to the Registrar
  3. CWhether internal audit costs are below one per cent of turnover, and whether the audit committee met four times
  4. DWhether internal audit replaced the statutory audit, and whether reports were filed with the NFRA

Explanation

Clause 3(xiv)(a) asks whether the company has an internal audit system commensurate with its size and nature of business, and (b) whether the internal auditors' reports for the period under audit were considered by the statutory auditor. The other options invent requirements not found in the text.

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