SA 610 Using the work of internal auditors’ states that in order for the external auditor to use specific work of the internal auditors, the external auditor shall evaluate and perform audit procedures to determine its efficacy for the external auditor’s purposes Required a. Explain the factors that the external auditor will consider when evaluating the work of the internal auditor b. ZPM is a listed limited liability company with year end of 30 June, ZPM’s main activity is selling home improvement or Do-It-Yourself (DIY) products to the public. Products sold range from nails, paints and tools to doors and showers; some stores also sell garden tools and furniture. Products are purchased from approximately 200 different suppliers. ZPM has 103 stores in eight different countries. ZPM has a well-staffed internal audit department, who reported on a regular basis to the audit committee. Areas where the internal and external auditors may carry out work include: 1. Attending the year-end inventory count in 30 stores annually. All stores are visited on rotational basis. 2. Checking the internal controls over the procurement system (e.g ensuring a liability is only recorded when inventory has been received.) Required, for each of the above two areas, discuss i) The objectives of the internal auditor ii) The objectives of the external auditor and iii) Whether the external auditor will rely on the internal auditor, and if reliance is required, the extent of that reliance c. Although an internal audit function may undertake a number of assignments and provide useful information for the organization, it does have limitations. Required Explain THREE limitations of the internal audit function.
SA 610 Using the work of internal auditors’ states that in order for the external auditor to use
specific work of the internal auditors, the external auditor shall evaluate and perform
procedures
Required
a. Explain the factors that the external auditor will consider when evaluating the work of the
internal auditor
b. ZPM is a listed limited liability company with year end of 30 June, ZPM’s main activity is
selling home improvement or Do-It-Yourself (DIY) products to the public. Products sold
range from nails, paints and tools to doors and showers; some stores also sell garden tools
and furniture. Products are purchased from approximately 200 different suppliers. ZPM has
103 stores in eight different countries. ZPM has a well-staffed internal audit department, who
reported on a regular basis to the audit committee. Areas where the internal and external
auditors may carry out work include:
1. Attending the year-end inventory count in 30 stores annually. All stores are visited on
rotational basis.
2. Checking the internal controls over the procurement system (e.g ensuring a liability
is only recorded when inventory has been received.)
Required, for each of the above two areas, discuss
i) The objectives of the internal auditor
ii) The objectives of the external auditor and
iii) Whether the external auditor will rely on the internal auditor, and if reliance is required,
the extent of that reliance
c. Although an internal audit function may undertake a number of assignments and provide
useful information for the organization, it does have limitations.
Required
Explain THREE limitations of the internal audit function.
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