ExpertACCA · Question 11 · Audit Evidence
SECTION A - CASE 3: AQUAPURE UTILITIES
AquaPure Utilities is a highly regulated public utility company managing water and waste services. You are auditing the financial statements for the year ended 31 March 20X6.
During the audit, you note the following:
- AquaPure has a large internal audit (IA) department that recently completed a review of the procurement controls.
- The billing system is highly automated, generating millions of micro-invoices based on smart meter readings.
- The company owns a vast network of underground water pipes, which are difficult to physically verify.
- You plan to use substantive analytical procedures to audit water revenue.
Question:
Before relying on the work of AquaPure's internal audit department regarding procurement controls, which TWO of the following factors MUST the external auditor evaluate according to ISA 610?
SECTION A - CASE 3: AQUAPURE UTILITIES
AquaPure Utilities is a highly regulated public utility company managing water and waste services. You are auditing the financial statements for the year ended 31 March 20X6.
During the audit, you note the following:
- AquaPure has a large internal audit (IA) department that recently completed a review of the procurement controls.
- The billing system is highly automated, generating millions of micro-invoices based on smart meter readings.
- The company owns a vast network of underground water pipes, which are difficult to physically verify.
- You plan to use substantive analytical procedures to audit water revenue.
Question:
Before relying on the work of AquaPure's internal audit department regarding procurement controls, which TWO of the following factors MUST the external auditor evaluate according to ISA 610?
Answer options:
The extent to which the internal audit function's organizational status supports its objectivity.
Whether the internal audit function is outsourced to a Big 4 accounting firm.
The level of competence of the internal audit function.
Whether the internal audit function reports directly to the external auditor.
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