CPA Exam — AUDPerforming Further Procedures and Obtaining EvidenceMedium
A client's internal audit function is considered highly competent and objective. The external auditor decides to use the internal auditors to provide direct assistance in performing certain substantive procedures. Which of the following tasks would be most appropriate for the internal auditors to perform under the direct supervision of the external auditor?
- AMaking judgments about the materiality of misstatements.
- BEvaluating the adequacy of the allowance for doubtful accounts.
- CAssessing the risks of material misstatement.
- DConfirming accounts receivable balances with customers.
Show answer & explanationAnswer & explanation
Correct answer: D. Confirming accounts receivable balances with customers.
Confirming accounts receivable is a routine, objective task that typically does not require significant judgment and can be performed by internal auditors under direct supervision, as it is a substantive procedure.
Why the other options are wrong
- A. Judgmental tasks are generally reserved for the external auditor.
- B. Evaluating estimates such as the allowance for doubtful accounts requires significant professional judgment.
- C. Assessing risks is a core responsibility of the external auditor requiring extensive judgment.
Direct Assistance from Internal Auditors
When external auditors use internal auditors to perform audit procedures under the external auditor's direction, supervision, and review, subject to strict limitations on judgmental tasks.
- External auditor must supervise and review the work.
- Internal auditors cannot make significant judgments.
- Appropriate for routine, objective tasks (e.g., confirmations, inventory observation).
Memory trick: SCOPE: Supervision, Competence, Objectivity, Professional Judgment, External responsibility.