- 4 Marks
Question
(d) ISA 610 using the work of internal auditors provides guidance to external auditors on the use of internal audit work.
Required:
List and explain the various criteria that should be considered by external auditors when assessing whether to take reliance from work performed by internal audit.
(4 marks)
Answer
The external auditors should consider the following criteria when assessing whether to rely on internal audit work:
- Objectivity of Internal Auditors:
- The external auditor should assess the degree of independence of the internal audit function. This includes reviewing whether internal auditors report to an appropriate level within the organization, such as the audit committee, and ensuring they are free from conflicts of interest.
- Technical Competence of Internal Auditors:
- The external auditor must evaluate whether the internal auditors possess the necessary skills and experience to perform their duties effectively. This involves assessing their qualifications, experience, and professional training.
- Scope of Internal Audit Function:
- The external auditor should review the scope and nature of the internal audit assignments. The auditor should ensure that the areas covered by internal audit are relevant to the financial statement audit and that the internal auditors have adequately covered key risk areas.
- Due Professional Care:
- The external auditor should confirm that the internal audit work has been properly planned, supervised, and documented. This includes ensuring that the internal auditors exercised due care in performing their work and adhered to professional standards.
- Tags: Audit evidence, Audit Standards, External audit, Internal Audit, Reliance on Audit Work
- Level: Level 2
- Topic: Audit and Assurance Evidence
- Series: MAY 2016
- Uploader: Dotse