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    Jaden Eu
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    The document discusses outsourcing internal audit functions and the implications for external auditors. It also discusses related parties and related party transactions. Outsourcing internal audit could benefit Mac Co by reducing costs and gaining expertise, but it may impact external audit by reducing available evidence and increasing reliance on the outsourced internal audit. Auditors may not identify all related parties due to limitations of financial records and management representations, so audit procedures like examining major contracts and invoices are needed to check for related party transactions like those between Bill Co and Lantern Co.

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    18. Outsourcing, related parties

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    The document discusses outsourcing internal audit functions and the implications for external auditors. It also discusses related parties and related party transactions. Outsourcing internal audit could benefit Mac Co by reducing costs and gaining expertise, but it may impact external audit by reducing available evidence and increasing reliance on the outsourced internal audit. Auditors may not identify all related parties due to limitations of financial records and management representations, so audit procedures like examining major contracts and invoices are needed to check for related party transactions like those between Bill Co and Lantern Co.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    7 views1 page

    Outsourcing, Related Parties

    Uploaded by

    Jaden Eu
    The document discusses outsourcing internal audit functions and the implications for external auditors. It also discusses related parties and related party transactions. Outsourcing internal audit could benefit Mac Co by reducing costs and gaining expertise, but it may impact external audit by reducing available evidence and increasing reliance on the outsourced internal audit. Auditors may not identify all related parties due to limitations of financial records and management representations, so audit procedures like examining major contracts and invoices are needed to check for related party transactions like those between Bill Co and Lantern Co.

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    © All Rights Reserved
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    of 1

    OUTSOURCING

    Dec 2007 Q2
    (a) Define ‘outsourcing’ and explain the matters to be considered in planning the audit of
    salary expense. Outsoursed been to external party
    (9 marks)

    Jun 2010 Q2
    (a) Evaluate the benefits specific to Mac Co of outsourcing its internal audit function.
    (6
    marks)

    (b) Explain the potential impacts on the external audit of Mac Co if the decision is taken to
    outsource its internal audit function. (4
    marks)

    RELATED PARTIES & RELATED PARTY TRANSACTIONS

    Jun 2011 Q1(b)


    (i) Explain the inherent limitations which mean that auditors may not identify related
    parties and related party transactions; and (4
    marks)

    (ii) Recommend the audit procedures to be performed in relation to Bill Co’s transactions
    with Lantern Co. (4
    marks)

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