If a company has an effective internal audit department,
A) the internal auditors can express an opinion on the fairness of the financial statements.
B) their work cannot be used by the external auditors per PCAOB Standard 5.
C) it can reduce external audit costs by providing direct assistance to the external auditors.
D) the internal auditors must be CPAs in order for the external auditors to rely on their work.

Question

Quizplus · Accepted Answer

An effective internal audit department can provide direct assistance to the external auditors, which can reduce external audit costs. However, internal auditors cannot express an opinion on the fairness of the financial statements, as that is the responsibility of the external auditors. Additionally, while external auditors can rely on the work of internal auditors, they must evaluate the adequacy and effectiveness of that work themselves, regardless of whether the internal auditors are CPAs. Finally, while PCAOB Standard 5 requires external auditors to evaluate the work of internal auditors, it does not prohibit them from using that work in their own audit procedures.

If a Company Has an Effective Internal Audit Department