Shark Estate Agents Ltd is a company offering estate agency service to the public through it networks of branches in the Midlands. The company has some 270 staff.

The board consists of six people, a part-time chairman, a chief executive, two other full-time executives and two representatives of the owners. The company is jointly owned by an American bank and a city property group. The company have an internal audit department consisting of Legge who is a young chartered certified accountant and Foot who is an accounting technician. They also have a secretary, Marvis. They report their monthly activities monthly in details to the board and to the audit committees of the American bank and the city property group.

Required

What work would the internal audit department do? (10 marks)

In what ways may the external auditors place reliance on their work? (10 marks)

Draw up a checklist for the external auditors to use to assess the internal auditors as potentially being capable of producing work on which the external auditors may rely (10 marks)

(Total 30 marks)