Page 326 - CA Final PARAM Digital Book.
P. 326
• Summary of the critical findings;
• Detailed audit findings with elaboration on business impact and root cause of such issues;
• Rating of the highlighted issues (E.g High / Medium / Low) in accordance to the rating criteria
approved by Audit Committee;
• Audit recommendation to improve control environment and address the highlighted finding;
• Response received from the responsible functional authority containing action plan and
target timelines for action.
QNO FOLLOW-UP BY INTERNAL AUDITOR New Course – (SM23)
614.840 TITANIUM CNO -- IIA.140
"The XYZ Ltd is has appointed Mr. A to conduct their internal audit for new financial year. The Audit
committee requested Mr. A to present their analysis on the implementation of recommendation of
previous audit report and highlight critical areas which need immediate attention of Audit Committee?
What should be the steps followed by internal auditor to address this requirement of Audit Committee?"
Answer As per SIA 390 Monitoring and Reporting of Prior Audit Issues, the Chief Internal Auditor is responsible for
continuously monitoring the closure of prior audit issues through timely implementation of action plans
included in past audits. This shall be done with a formal monitoring process, elements of which are pre-
agreed with management and those charged with governance. The responsibility to implement the action
plans remains with the management.
In monitoring and reporting of prior audit issues, the responsibility of the Internal Auditor is usually in the
form of an “Action Taken Report (ATR) of previous audits”.
To address the requirement of Audit Committee in the given situation, Internal Auditor should assess the
action taken against the previous audit findings and report a summary of the action taken by the
management. Typical Action Taken Report may include the following:
➢ Reference to the previous audit reporting containing the reported issues
➢ Implementation Action agreed by the management along with target implementation date
➢ Status of action taken by management. The same may be classified under Implemented / Not
Implemented
➢ Residual risk and rating for any unimplemented action
➢ Audit findings not implemented for long period of time
➢ Any critical audit finding that require immediate action for action or implementation
QNO Can we rely on work of internal auditor, evaluating going concern? New Course – (SM23)
614.950 TITANIUM CNO -- Unique
Up Down Limited is in doldrums since last two years. The demand for its products has declined drastically.
The statutory auditor is of the view that situation has put into question going concern assumption of the
company. Its internal auditor has helped management in devising a strategy to deal with such risks and
come out of the situation. The plan includes venturing into different product lines using same plant with
minor modifications. Further, internal auditor has also prepared estimates of revenue generation along
with cash flows.
Can statutory auditor place total reliance on work performed by internal auditor in this regard?
Answer The greater the judgment needed to be exercised in planning and performing the audit procedures and
evaluating the audit evidence, the external auditor will need to perform more procedures directly because
using the work of the internal audit function alone will not provide the external auditor with sufficient
appropriate audit evidence.
The appropriate use of going concern assumption requires significant judgment on part of statutory
auditor.
Therefore, statutory auditor cannot place total reliance on internal auditor’s work in this regard and he
should perform more procedures directly.
www.auditguru.in PARAM 16.7 | P a g e