Page 69 - CA Final PARAM Digital Book.

QNO Nature of Work to be Assigned to Internal Auditor Old Course – (M18E, SM21,N22E)
103.400 TITANIUM CNO—SA610.140
ABC Ltd. is engaged in the business of trading and manufacturing of readymade garments. The company
has large balances of accounts receivables as on March 31, 2022, which has been assessed as the area of
high risk in the audit planning stage. For the year ended March 31, 2022, in respect of the valuation of
accounts receivables, the Statutory Auditor has assigned the checking of the accuracy of the ageing of the
accounts receivables and provision made towards doubtful receivables, to the internal auditor. Please
advise the statutory auditor, the areas in which direct assistance from internal auditor cannot be taken .

Also, comment in this scenario, whether statutory auditor can take internal auditor's assistance

OR
Moon Ltd. of which you are the Statutory Auditor, have an internal audit being conducted by an outside
agency. State the factors that weigh considerations in opting to make use of direct assistance of the
internal auditors for the purpose of statutory audit.
Answer ➢ Determining the Nature and Extent of Work that Can Be Assigned to Internal Auditors
Providing Direct Assistance:

SA 610 ‘Using the work of Internal Auditor’ Deals about the concept of direct assistance of internal
auditor. In determining the nature and extent of work that may be assigned to internal auditors and
the nature, timing and extent of direction, supervision and review that is appropriate in the
circumstances, the external auditor shall consider:
• The amount of judgment involved in:
• Planning and performing relevant audit procedures; and
• Evaluating the audit evidence gathered.
• The assessed risk of material misstatement; and
• The external auditor’s evaluation of the existence and significance of threats to the
objectivity and level of competence of the internal auditors who will be providing such
assistance.

If using internal auditors to provide direct assistance is not prohibited by law or regulation, and the
external auditor plans to use internal auditors to provide direct assistance on the audit, the external
auditor shall evaluate the existence and significance of threats to objectivity and the level of
competence of the internal auditors who will be providing such assistance.

The external auditor’s evaluation of the existence and significance of threats to the internal auditors’
objectivity shall include inquiry of the internal auditors regarding interests and relationships that
may create a threat to their objectivity.

QNO Internal Auditor identifies deficiency in internal control system. New Course – (SM23)
103.800 TITANIUM CNO-- SA610.060
RK Living Limited is engaged in manufacturing and processing of textile fabrics. It purchases its raw
material from a company based in Silvassa taxable @ 12%. It takes about 3-4 days for raw materials to
reach the company’s plant. Recently, the company has revamped its internal control system for recording
its transactions. You have also assumed charge as head of internal audit department of the company few
days before.

It is noticed that information system requires booking of purchases in purchase ledger and stock records
from date of purchase invoice only. How you would deal with above matter as internal auditor of the
company?
Answer Internal audit involves continuous and critical appraisal of functioning of an entity with a view to suggest
improvements thereto and add value to and strengthen the overall governance mechanism of the entity
including its strategic risk management and internal control system. Internal audit also involves evaluation
of internal control to provide assurance to management regarding design, implementation and operating
effectiveness of control.

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