- 20 Marks
AA – L2 – Q36 – Internal Control Systems
Describe the impact of interim audit work on internal controls for the final audit. List factors to consider for additional work on internal controls at the final audit post-interim audit. Explain how an audit committee benefits external and internal auditors. Explain differences in internal and external auditors' responsibilities for fraud and error prevention, detection, and reporting. List criteria for external auditors to rely on internal audit work per ISA 610.
Question
An audit is often carried out in more than one sitting, especially when there are tight reporting deadlines. The auditors will carry out an interim audit during the period under review followed by a final audit shortly after the year end. Work at the interim audit will often include obtaining audit evidence about the operating effectiveness of controls.
(a)(i) Describe the impact on the final audit of performing work on internal controls at an interim audit.
(ii) Assuming an interim audit has taken place and work on internal controls was carried out, list the factors the auditor should consider when deciding how much more work is needed at the final audit in relation to internal controls.
Businesses may establish an audit committee to help improve corporate governance within a company. This can provide benefits to both internal and external auditors.
(b) Explain how an audit committee can benefit both the external auditors and the internal auditors of an entity.
There are similarities and differences between the responsibilities of internal and external auditors. Both internal and external auditors have responsibilities relating to the prevention, detection and reporting of fraud, for example, but their responsibilities are not the same.
(c) Explain the difference between the responsibilities of internal auditors and external auditors for the prevention, detection and reporting of fraud and error.
ISA 610 Using the Work of Internal Auditors provides guidance to external auditors on the use of internal audit work.
(d) List and explain the various criteria that should be considered by external auditors when assessing whether to take reliance from work performed by internal audit.
Find Related Questions by Tags, levels, etc.
- Tags: Detection, Error, External Auditors, Fraud, Internal Auditors, ISA 240, Prevention, Reporting
- Level: Level 2
- Topic: Fraud and Error
