Question

If the internal audit function is competent and objective, the auditor may generally rely on the work of an internal audit function in certain areas to reduce the amount of external audit work in those areas.

a)True
b)False

Answer 1

If the internal audit function is competent and objective, the auditor may generally rely on their work in certain areas to reduce the amount of external audit work needed in those areas.

Step-by-step explanation:

True. If the internal audit function is competent and objective, the auditor may generally rely on their work in certain areas to reduce the amount of external audit work needed in those areas. This is because the internal audit function is responsible for evaluating and improving the effectiveness of internal controls and risk management processes.

For example, if the internal auditors have already performed detailed testing and assessments of financial controls related to cash, the external auditor may choose to rely on their work and perform limited procedures instead of starting from scratch.

However, it is important to note that the external auditor still needs to independently evaluate the competence and objectivity of the internal audit function to ensure their reliance is justified.