Q: 6
An internal audit charter, approved by the board, restricts the internal audit activity to providing
assurance only on the reliability of financial information and the effectiveness of internal accounting
controls. Which of the following statements is true regarding the extent to which the external auditor
may rely on the internal audit activity's work?
Options
Discussion
Option D is right, the scope restriction means the internal auditor's work is narrower so external auditors should be careful if relying on it. Can't just assume everything checks out because board approved it. Makes sense?
C is too extreme, D is what you'd see on the actual exam.
Option D here. Since the internal audit charter is so limited, most exam guides say external auditors have to use their work carefully and can't just rely on it for everything. Saw this in official practice Qs, pretty sure that's how it's tested.
A . The charter is clear and approved by the board, so I figured the external auditor could make full use. Saw a similar scenario in some test prep questions. If anyone has seen different guidance in the official manual, let me know.
C/D? I see why someone might say C since a restrictive charter could lead to bias, but usually exam answers favor D because external auditors can still use the work, just have to be careful. So C looks a bit of a trap. Pretty sure it's D but open to being convinced otherwise.
D makes the most sense here.
C or D? I actually think C is the better fit. If the internal audit charter is that limited, it might create some risk of bias or insufficient professional care, so external auditors could have to fully disregard their work. The scope restriction feels too tight for even cautious reliance. Not totally certain though if exam wants that strict an interpretation.
This one feels like D to me, since the external auditor can only use that work carefully when the internal audit scope is so narrow. Not totally sure though, some exam versions play with the wording.
Totally agree D fits best here. Since the charter limits internal audit's scope, external auditors need to be cautious about reliance, especially outside financial info and accounting controls. Not 100% sure but that's what aligns with IIA guidance, correct me if anyone sees it differently.
I could see someone picking C since bias and due care might be concerns with such a restricted scope.
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