Hanlon Corp. maintains a large internal audit staff that reports directly to the accounting department. Audit reports prepared by the internal auditors indicate that the system is functioning as it should and that the accounting records are reliable. An independent auditor will probably
A) eliminate tests of controls.
B) increase the depth of the study and evaluation of administrative controls.
C) avoid duplicating the work performed by the internal audit staff.
D) place limited reliance on the work performed by the internal audit staff.

Question

Quizplus · Accepted Answer

The independent auditor cannot rely solely on the work performed by the internal audit staff as they are not independent and may have biases towards the company they are working for. Hence, the independent auditor should place limited reliance on the work performed by the internal audit staff and perform their own tests of controls and evaluation of administrative controls.