The chief audit executive at Brindle Manufacturing is building next year's audit plan and learns that the external financial auditors already test controls over the revenue cycle each year. She wants to reduce duplicated testing by relying on that work. Before deciding how much to rely on it, what should she evaluate first?
- AWhether the audit committee has formally approved the external auditors' engagement letter for the current financial year
- BWhether relying on the external auditors' testing will reduce the internal audit function's own budgeted hours for the year
- CThe external auditors' competence, objectivity, and the scope and adequacy of the work they performed on those controls Correct
- DWhether the external auditors are willing to sign a statement accepting responsibility for the revenue-cycle conclusion
Why A is wrong: Tempting because engagement approval is a real governance step, but committee approval of the external audit engagement says nothing about whether that work is competent, objective, or relevant to internal audit's control objective.
Why B is wrong: Tempting because efficiency motivates coordination, but cost saving is a benefit of reliance, not a criterion for it; the decision to rely must rest on the quality and relevance of the other provider's work.
Why C is correct: Correct. Reliance criteria require assessing the other provider's competence and objectivity and confirming that the work's scope, timing, and rigour actually cover the internal audit objective before placing reliance on it.
Why D is wrong: Tempting because shared responsibility sounds prudent, but the internal auditor retains responsibility for conclusions even when leveraging others' work, so seeking a transfer of responsibility misstates how reliance operates.