Auditing and assurance revision question and answer

Auditing and Assurance Revision Questions and Answers

CA. Khari Adhikari heads the internal audit department of Tee limited. The external audit firm decided to rely on the internal auditor‟s work relevant for external audit because of the professional competency of the chief of internal audit of Tee Limited. Later it was found that the external auditor had conducted audit procedures himself instead of relying on internal auditor‟s work; however, claimed that he should not be made responsible for inappropriate audit opinion because he had relied on the work of qualified internal auditor.
Answer:
The role of internal auditing is determined management, and its objectives differ from those of the external auditor who is appointed to report independently on the financial statements. The internal audit function‟s objectives vary according to management‟s requirements. The external auditor‟s primary concern is whether the financial statements are free from material misstatements. Nevertheless some of the means of achieving their respective objectives are often similar and thus certain aspects of internal auditing may be useful in determining the nature, timing and extent of external audit procedures. Internal auditing is part of the entity. Irrespective of the degree of autonomy and objectivity of internal auditing, it cannot achieve the same degree of independence as required of the external auditor when expressing an opinion on the financial statements. The external auditor has sole responsibility for the audit opinion expressed, and that responsibility is not reduced any use made of internal auditing. All judgments relating to the audit of the financial statements are those of the external auditor.

The external auditor has sole responsibility for the audit opinion expressed, and that responsibility is not reduced any use made of internal auditing. All judgments relating to the audit of the financial statements are those of the external auditor. Hence the external audit firm in the given situation cannot be relieved of its duty to express opinion on the financial statements relying on the work of internal auditor.



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