Auditor Reliance

AAA – L3 – Q36 – Internal audit

Evaluate use of internal auditors' work on cash sales for Coral Bites audit.

Question

You are the audit manager in charge of the audit of Coral Bites, a company which runs a chain of snack bars operating in a number of beach holiday resorts. Your firm has been the auditor for a number of years and has always had to substantively test cash sales because of a lack of control over the recording of takings. The auditor’s reports to date have been unmodified.
You have recently been informed that the company has taken on a newly qualified chartered accountant as chief internal auditor and an unqualified assistant internal auditor. Since their appointment half way through the year ended 31 December 20X8 the two have spent most of their time carrying out substantive procedures on cash sales.
The directors are hopeful that your audit fee this year will decrease because you will be able to use the work carried out by the internal auditors.
Required:
(a) Explain the issues that will be relevant to your firm in deciding whether you can use the work performed by the internal auditors.

(b) Explain how much reliance to place on that work.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Evidence, Auditor Reliance, Cash sales, Internal Audit, Substantive testing
Level: Level 3

Topic: Internal Audit and Outsourcing

AA – L2 – Q46 – Audit Evidence

Describe how audit software can assist in auditing revenue and receivables at Brighton Components. Discuss external auditor reliance on internal audit’s use of embedded software at Brighton Components.

Question

The audit manager of Brighton Components has decided that audit software can be used effectively in the audit of revenue and trade receivables. He has discussed this with the firm’s computer audit department and with the finance director of Brighton Components and this approach has been agreed as a feasible one. Furthermore, the finance director has asked his internal audit function to investigate the possibility of installing embedded software to help the external auditors in their work.

Required:
(a) Describe, giving examples, how audit software in general could assist the audit firm in their audit of revenue and receivables.

(b) Discuss the extent to which the external auditor could rely on the results of the internal auditor’s use of embedded software.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Evidence, Auditor Reliance, Embedded Software, Internal Audit
Level: Level 2

Topic: Audit Evidence

Tag (SQ): Auditor Reliance

Search

Filter by Professional Bodies

Filter by Subject

Filter by Topics

Filter by Levels

AAA – L3 – Q36 – Internal audit

Evaluate use of internal auditors' work on cash sales for Coral Bites audit.

AA – L2 – Q46 – Audit Evidence

Describe how audit software can assist in auditing revenue and receivables at Brighton Components. Discuss external auditor reliance on internal audit’s use of embedded software at Brighton Components.

Our Offerings

Contact Info

My Account

Get In Touch

Tag (SQ): Auditor Reliance

Search

Filter by Professional Bodies

Filter by Subject

Filter by Topics

Filter by Levels

AAA – L3 – Q36 – Internal audit

Evaluate use of internal auditors' work on cash sales for Coral Bites audit.

You're reporting an error for "AAA – L3 – Q36 – Internal audit"

AA – L2 – Q46 – Audit Evidence

Describe how audit software can assist in auditing revenue and receivables at Brighton Components. Discuss external auditor reliance on internal audit’s use of embedded software at Brighton Components.

You're reporting an error for "AA – L2 – Q46 – Audit Evidence"

admin

Pick a Form