Page 324 - CA Final PARAM Digital Book.

(b) Scope of Function - The external auditor should ascertain the nature and depth of coverage of the
assignment which the internal auditor discharges for management. He should also ascertain to
what extent the management considers, and where appropriate, acts upon internal audit
recommendations.
(c) Technical Competence - The external auditor should ascertain that internal audit work is
performed by persons having adequate technical training and proficiency. This may be
accomplished by reviewing the experience and professional qualifications of the persons
undertaking the internal audit work.
(d) Due Professional Care - The external auditor should ascertain whether internal audit work appears
to be properly planned, supervised, reviewed and documented. An example of the exercise of due
professional care by the internal auditor is the existence of adequate audit manuals, audit
programmes and working papers.

QNO Internal Auditor Agreed to Ensure Compliance with Laws & Regulations New Course – (SM23)
614.250 TITANIUM CNO -- 610.080
CA Deva is internal auditor of a listed company. The company wants to make sure that it is in compliance
with SEBI requirements at all times and it is never on the wrong side of law. It asks its internal auditor to
manage its compliance tracking system including directly corresponding with regulator in this regard. The
profile and scope of internal audit agreed at time of appointment included “compliance with laws and
regulations.”

Can he perform such type of activities in capacity of internal auditor of company?
Answer The Internal Auditor does not assume any responsibility to manage or operate the compliance framework
or to take compliance related decisions. It is not responsibility of the Internal Auditor to execute or resolve
compliance related risks (e.g., engaging directly with regulators, etc.).

Although internal audit function provides independent assurance to enhance governance (which includes
compliance with laws and regulations), it does not assume operational responsibility of its compliance
framework. It is the responsibility of the management. He is responsible for auditing the compliance
framework and not managing it. Similarly, he does not accept compliance related risks like directly
engaging with regulator.

QNO Independence of Internal Auditor Old Course – (N23M)
614.500 TITANIUM CNO -- Unique
Consider the following statement: “The internal auditor of a company shall be free from any undue

influences which force him to deviate from the truth. He shall be independent.” Is above statement
proper? If so, how independence of internal auditor can be established?

Answer The Internal Auditor shall be free from any undue influences which force him to deviate from the truth.
This independence shall be not only in mind but also in appearance. Also, the internal auditor shall resist
any undue pressure or interference in establishing the scope of the assignments or the manner in which
these are conducted and reported, in case these deviate from set objectives. The independence of the
internal audit function and the Internal Auditor within the organization is a vital aspect of maintaining
effective corporate governance. It is important to ensure that the internal audit function is free from any
undue influence or pressure that may affect its ability to provide impartial and objective assessments of the
organization's operations, risks, and controls.
Therefore, the given statement is proper.

To establish the independence of the Internal auditor, several factors need to be considered. Firstly, the
overall organizational structure of key personnel plays a crucial role. The Internal auditor should be
positioned in a way that allows them to operate independently and objectively. This includes having direct
access to the Audit Committee, Board of Directors, and other senior executives. Secondly, the reporting
line of the Chief Internal Auditor is an important consideration. The Chief Internal Auditor should report to
the highest level of authority within the organization, such as the CEO or the Board of Directors. This
ensures that the Internal auditor has the necessary authority and support to carry out their responsibilities
effectively. Finally, the powers and authority derived from superiors further establish the independence of

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