You are the manager of a large auditing firm and have recently finalized the audit of Orico Ltd, a large, publicly-listed company. The audit went smoothly and no major problems were encountered. As in previous years, your firm adopted a controls-based approach to the audit, given the efficient and effective internal control structure that Orico has in place. All of the exceptions that were noted in the testing phase were raised with the appropriate level of management and were not considered serious enough to bring to the attention of the board. All follow-up work as a result of these exceptions has been satisfactorily performed.

The financial controller, Tom DeSouza, has received a request from the overseas parent company that all subsidiaries obtain an opinion on their internal control structure from their external auditors as part of the overall internal audit function of the group. Tom has approached your firm for the opinion and has indicated that the opinion, given that the audit has just been satisfactorily completed, could be prepared and signed with no extra audit time required.

Required:

How much reliance can be placed on the results of the audit that has just been completed?

Give reasons for your answer?