Biggy Furnitures Ltd. is a high-end office furniture and equipment company. The company has grown tremendously in its customer base in recent years and apart from selling furniture and equipment, it now has a maintenance and leasing department. The company has an elaborate internal audit function to enhance the internal control system. Biggy Furnitures Ltd. has appointed you as the external auditor and requested you to cooperate with the company internal auditor to keep the total audit costs down. The company would like you to rely on the work of the internal auditor.
The internal auditor provides the following services to the company:
- An audit of the operations of internal controls in the company’s major functions (operations, customer support and information services).
- A review of the structure of internal controls in each major function every four years.
- An annual review of the effectiveness of measures put in place by the management to minimise the major risks facing the company.
In the year being audited, the company has had a major internal restructuring in its information services function. The internal auditor was closely involved in the preparation of the plan for restructuring and in the related post implementation review.
Required:
(i) Explain the extent to which you will seek to rely on the work of the internal auditor in each of the operational areas of Biggy Furnitures Ltd.
(ii) Describe FOUR circumstances in which it would not be possible for an external auditor to rely on the work of the internal auditor.
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