You are the external auditor of Aragon plc (Aragon), who currently do not have an internal audit department. This year Aragon audit committee have reviewed the need for internal audit and decided that they should have internal auditors. Some members the Board of Aragon dont agree with the decision as they dont think the internal auditors would be doing anything different from the external auditors (i.e. testing controls) and therefore it would be a waste of money. However, the Non-Executive Directors are determined and interested in potentially outsourcing the internal audit function and want to know whether your firm could also provide internal audit services to Aragon.

1. Discuss the key differences between external audit and internal audit.

(8 Marks)

2. Discuss the advantages and disadvantages Aragon should consider in outsourcing the internal audit function.

(8 Marks)

3. Discuss if your firm should provide both external and internal audit services for Aragon?