Reference no: EM132905812

You are an audit manager in RAB & Associates, and you are in the process of planning the upcoming audit of Ninsi Ltd, a large private company.

• In your initial conversation with Ninsi Ltd's finance director, you discovered that there is a small internal audit team, under the supervision of Adjoa Ampofo, a recently qualified accountant. Before heading up the internal audit department at Ninsi Ltd, Adjoa worked for the business advisory department of a major firm of professional accountants. The internal audit department has a manual of procedures that was created by Adjoa's predecessor. Internal audit work that is done each year includes observing the inventory count, as well as extensive testing of financial controls over the sales, purchases and wages systems.

• Adjoa reports directly to Ninsi Ltd finance director, who has overall responsibility for the department. In the course of the year the finance director instructed the team to work on the implementation of cost-cutting measures being introduced across the company. This is in addition to the team's responsibilities for testing the existing financial and operational controls. The internal audit team has three members, including Adjoa. The remaining team members are in the process of studying for professional accountancy qualifications. One team member left the company during the year, citing 'overwork' as his reason for leaving. As a result of financial pressures, Ninsi Ltd is currently operating under a recruitment freeze and the team member has not been replaced. In addition, team members currently qualifying have been told that Ninsi Ltd will no longer be able to offer them support in their professional studies.

Required

Problem 1: Identify and explain the matters that should be considered in respect of the extent to which reliance can be placed on the work of the internal audit function of Ninsi Ltd.