To: CEO
From: Audit Senior
Date: [Insert Date]
Re: Report on factors determining the External Auditors’ reliance on Internal Auditors’ work

Objectivity:

• The status of the internal audit function within the entity and the effect such status has on the ability of the internal auditors to be objective.
• Whether the internal audit function reports to those charged with governance or an officer with appropriate authority, and whether the internal auditors have direct access to those charged with governance.
• Whether the internal auditors are free of any conflicting responsibilities.
• Whether those charged with governance oversee employment decisions related to the internal audit function.
• Whether there are any constraints or restrictions placed on the internal audit function by management or those charged with governance.
• Whether and to what extent management acts on the recommendations of the internal audit function, and how such action is evidenced.

Technical Competence:

• Whether the internal auditors are members of relevant professional bodies.
• Whether the internal auditors have adequate technical training and proficiency as internal auditors.
• Whether there are established policies for hiring and training internal auditors.

Due Professional Care:

• Whether activities of the internal audit function are properly planned, supervised, reviewed, and documented.
• The existence and adequacy of audit manuals or other similar documents, work programs, and internal audit documentation.

Communication:

• Communication between the external auditor and the internal auditors may be most effective when the internal auditors are free to communicate openly with the external auditors, and:
  • Meetings are held at appropriate intervals throughout the period;
  • The external auditor is advised of and has access to relevant internal audit reports and is informed of any significant matters that come to the attention of the internal auditors when such issues may affect the work of the external auditor; and
  • The external auditor informs the internal auditors of any significant matters that may affect the internal audit function.