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CMA Intermediate · Corporate Accounting and Auditing · Audit Risk, Internal Control, Internal Check and Internal Audit

While documenting the control system of Bharat Steels Ltd through questionnaires and flow charts, the auditor finds that the internal audit function reviews controls and tests their operation. According to SA 610 (Revised), such an internal audit function's activities relating to internal control may include:

SA 610 (Revised) says an internal audit function may be assigned to evaluate internal control, reviewing controls, evaluating their operation and performing tests to give assurance on design, implementation and operating effectiveness. It does not take over the external auditor's opinion responsibility or appoint auditors.

  1. ATaking over the statutory auditor's responsibility for the opinion on the financial statements
  2. BEvaluating internal control, including planning and performing tests to provide assurance on design, implementation and operating effectivenessCorrect
  3. CAppointing the statutory auditor and fixing remuneration
  4. DPreparing the entity's financial statements as the main duty

Explanation

SA 610 (Revised) lists evaluation of internal control among internal audit activities: reviewing controls, evaluating their operation, and performing tests to provide assurance on design, implementation and operating effectiveness. It does not transfer the auditor's responsibility for the opinion, nor involve appointing auditors or preparing statements.

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