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(a) Limitations of gathering audit evidence are:-
- It is usually expensive to gather evidence especially from third parties where such third
parties are numerous and geographically dispersed.
- There may be lack of co-operation from the staff and to some extent third parties in
availing audit evidence.
- There are possibilities of collusion between management employees and third parties
leading to distortions of audit evidence.
- The business of the entity might be technical and as such difficult to gather evidence and
the auditor has to use experts.
- There might be inadequate record or incomplete records which may limit internal
evidence.
- There may be problems of biased opinion especially in observations if they are made by
unqualified and incompetent audit personnel.
- Evidence from third parties may delay or there may be lack of co-operation in replying to
auditor's circularisation.
(b) Considerations under which the external auditor can rely on the work of the internal
auditor arc:
- The extent to which the internal audit functions organisational status and relevant policies
and procedures support the objectivity of internal auditors.
- The level of competence of the internal audit function i.e. their qualifications.
- Whether the internal audit function applies a systematic and disciplined approach
including quality control.
- Assessing of the management acts upon their reports.
- Availability of resources
- Previous experience
(c) Considerations that should be when forming an opinion made are:
- The financial statements adequately disclose the significant accounting policies selected
and applied.
- The accounting policies selected and applied are consistent with the applicable financial
reporting framework
- Compliance with the international financial reporting standards.
- The accounting estimates made by management are reasonable.
- The information presented in the financial statements is relevant, reliable, comparable
and understandable.
- The terminology used in the financial statements including the title of each financial
statement is appropriate.
- The financial statements provide adequate disclosures to enable the intended users to
understand the effect of material transactions
Kavungya answered the question on May 14, 2019 at 13:26
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