The External Auditor May Seek to Place Reliance on Internal

question 22

Short Answer

The external auditor may seek to place reliance on internal controls in order to restrict substantive testing.
In each of the following circumstances, select whether the external auditor is likely to place reliance or place no reliance on internal controls.
a. A company with an independent internal audit department
b. A family company where the financial director is related to the chief executive
c. A company where a fraud committed by the purchasing manager has been uncovered
State the main ways in which auditors can gather the evidence they need and provide an example of each method

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Definitions:

Girl Guide

A member of a scouting organization for girls that promotes character development, self-reliance, and responsibility.

Predictive Of Behaviour

Refers to factors or variables that are capable of anticipating or forecasting future actions or attitudes of individuals.

Psychology Of Persuasion

The study of how individuals influence others' beliefs, attitudes, and behaviors through communication and other techniques.

Implicit Theory

Beliefs or assumptions that individuals hold about how certain traits, behaviors, and personality characteristics are interrelated and can change over time.