Auditor's Duties in Respect of Internal Check

Duties of an Auditor in Respect of Internal Check

An auditor does not design or operate a business's internal check system — that remains

management's own responsibility (Section a) — but the auditor has several specific duties in

RELATION to it, because the strength of the internal check system directly shapes how the

auditor plans the rest of the audit:

1. To study and evaluate the internal check system in place, before deciding the nature, timing, and extent of the audit tests to be applied — this is normally one of the very first steps in an audit (connecting directly to "preparatory steps before commencement of a new audit," studied further in Class XII Ch3, Audit Procedure).
2. To test whether the system is actually operating as it is supposed to on paper, not merely to assume it works because a policy document describes it — this is typically done through a mix of enquiry, observation, and a limited amount of direct verification (a "walk-through" of a few transactions from start to finish).
3. To decide how much reliance can reasonably be placed on the system. Where the internal check is found to be strong and genuinely operating, the auditor may reasonably reduce the extent of independent test-checking; where it is weak or absent, the auditor must correspondingly increase the depth and extent of independent verification.
4. Never to relax vigilance entirely, however strong the internal check appears — the auditor remains independently responsible for the audit opinion, and a strong internal check system reduces, but never eliminates, the need for the auditor's own independent judgment (recall Ch3's limitation: an audit is never a guarantee, only a reasonable, evidence-based check).
5. To report material weaknesses found in the internal check system to management (commonly through a formal "management letter" in professional practice), even where those weaknesses do not, by themselves, affect the audit opinion on the financial statements.
6. To remain alert to the possibility of collusion or management override, since these are …