MCQ for the day- D.

MCQ for the day-

D.M. Ltd. appointed M/s K.K. & Co., Chartered Accountants as Statutory Auditors. The Statutory
Auditors found the internal audit function reliable and effective. The Statutory Auditor assigned
the task of assessing the inventory levels of a few branches where the Statutory Auditor believed
that there might be some risk of material misstatement to one of the internal auditor Mr. Ryan.
Since the Internal Auditor had recently done such assessment as a part of their internal audit
program, therefore, the Statutory Auditor believed that they could rely on the former's report.
Besides this, because of the paucity of time the Statutory Auditors also requested Mr. Ryan to
help them in some paperwork including audit documentation. Before the audit was concluded,
Mr. Ryan got promoted and shifted to another city. During the audit discussion stage, the lead
Statutory Auditory found out that the documentation delegated to Mr. Ryan was not complete.
Accordingly, Statutory Auditor further checked the inventory work delegated to the Internal
Auditor, however, it was found to be satisfactory. In view of the above case scenario, state which
of the following statement(s) hold true:


a) The working of Internal Audit function was reliable and satisfactory; therefore, the allocation
of inventory level work was within the authority of the Statutory Auditor. This was further
confirmed by the satisfactory work of Internal Auditory, as found out later.


b) The documentation would be considered complete as far as the Statutory Auditor's
responsibility is concerned as the missing documentation was because of the oversight of the
Internal Auditor.


c) Since the Internal Audit had conducted the similar inventory level checking activity recently,
therefore, because of familiarity with the audit the Statutory Auditor was right in delegating
the same to the Internal Auditor.


d) The Statutory Auditors should not have delegated the inventory level checking to the Internal
Auditor, as the risk assessed was material. Further, the audit documents are Statutory
Auditor's property and responsibility. Also, the Statutory Auditor should maintain
confidentiality during all the stages of the audit. Therefore, it was wrong on the part of the
Statutory Auditor to handover the task of audit documentation to the Internal Auditor