Answer (A) is correct . The external auditor’s traditional role is to perform an audit to determine whether the externally reported financial statements are fairly presented. Thus, a financial audit by the internal audit activity is relevant to the traditional external audit because it is an engagement in which the reliability and integrity of financial information is evaluated. Such an engagement is consistent with internal auditing standards. According to Standard 2130.A1, the internal audit activity must evaluate the adequacy and effectiveness of controls in responding to risks within the organization’s governance, operations, and information systems. This evaluation extends to the (1) reliability and integrity of financial and operational information; (2) effectiveness and efficiency of operations; (3)?safeguarding of assets; and (4)?compliance with laws, regulations, and contracts.
Answer (B) is incorrect because Operational engagements are concerned with operational efficiency and effectiveness, matters that are not the primary focus of an external audit of financial statements.
Answer (C) is incorrect because Routine supervisory review of production planning is a concern of management but does not directly affect the fair presentation of the financial statements.
Answer (D) is incorrect because The existence of a preventive maintenance program is not directly relevant to a financial statement audit.
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