Final answer:
The statement is true, as external auditors can rely on competent and objective internal audit work to potentially reduce their own audit efforts in those areas.
Step-by-step explanation:
The statement is true. If the internal audit function is competent and objective, an external auditor may indeed place reliance on the work of the internal audit function. This is to reduce duplicative efforts and to focus external audit resources more efficiently. However, the external auditor must first evaluate the competence, objectivity, and scope of the internal audit work before deciding on the extent of reliance.
The competence of the internal audit team refers to their ability to perform tasks with the necessary technical skills and knowledge. Objectivity involves the internal auditors being free from conflicts of interest and not unduly influenced by others in the organization.
Effective collaboration between external and internal auditors can lead to improvements in overall audit effectiveness and may result in a reduction in the external audit work required in certain areas.