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CA Ravi Taori
16 Internal Audit
Please note content related to SA 610 which deals with using work of internal auditor and taking direct
assistance of internal auditor is covered in Ch 3.
Case Study – Scale Limited
Independence Concern: CA. P. found it unusual that as a Chief Internal Auditor, he was to report to the CFO.
This could compromise his independence.
Reporting Structure: For maintaining independence, the Internal Auditor should report directly to the Audit
Committee, not to functions like Finance and Accounts.
Operational Roles: The offer letter mentioned roles in "system automation" and "process re-engineering,"
which are operational in nature. This could further compromise his independence.
Caveat: CA. P. communicated that he couldn't assume full accountability for these operational areas and
would only take on a limited role for a short duration.
Company's Agreement: The company acknowledged and agreed to CA. P.'s concerns.
Risk-Based Approach: After joining, CA. P. adopted a risk-based approach to identify key audit areas.
Error Prevention: CA. P. emphasized a system and process-focused approach to prevent errors, enhancing the
company's governance mechanisms.
(CNO IA.020) INTERNAL AUDIT DEFINITION SCOPE AS PER SA 610
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