Question 1

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:
1. AquaPure has a large internal audit (IA) department that recently completed a review of the procurement controls.
2. The billing system is highly automated, generating millions of micro-invoices based on smart meter readings.
3. The company owns a vast network of underground water pipes, which are difficult to physically verify.
4. 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?

Accepted Answer

Recall the criteria in ISA 610 for relying on internal audit: 1) Objectivity, 2) Competence, 3) Systematic and disciplined approach.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Assuming internal audit must report to the external auditor, or that outsourcing is a strict requirement for reliance.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA AA — Audit and Assurance Practice Exam 5

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