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Psa 610 Using The Work of Internal Auditors: Requirements

This document provides guidance for external auditors on using the work of internal auditors. It discusses evaluating whether the internal audit function is objective and the internal auditors are technically competent. The external auditor should consider the nature, timing, and extent of procedures based on an evaluation of the internal auditors' work, including assessing the risks of material misstatement. Documentation is required of the external auditor's evaluation and procedures performed on the internal auditors' work.

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JJ Longno
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173 views2 pages

Psa 610 Using The Work of Internal Auditors: Requirements

This document provides guidance for external auditors on using the work of internal auditors. It discusses evaluating whether the internal audit function is objective and the internal auditors are technically competent. The external auditor should consider the nature, timing, and extent of procedures based on an evaluation of the internal auditors' work, including assessing the risks of material misstatement. Documentation is required of the external auditor's evaluation and procedures performed on the internal auditors' work.

Uploaded by

JJ Longno
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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PSA 610 USING THE WORK OF INTERNAL AUDITORS

Scope of this PSA  technical competence of the internal


auditor
 Deals with external auditor’s
 Whether the work of the internal
responsibilities regarding the work of
auditors is likely to be carried out with
internal auditors if the internal auditor’s
due
function is relevant to the audit.
professional care
 Does not deal with instances when
 Whether there is likely to be effective
individual internal auditors provide direct
communication between the internal
assistance to the external auditor in
auditors and the external auditor.
carrying out audit procedures.
In determining the planned effect of the work of
Relationship between the Internal Audit Function
the internal auditors on the nature, timing or
and the External Auditor
extent of the external auditor’s procedures, the
 The internal auditor’s function is external auditor shall consider:
determined by those charged w/
 The nature and scope of specific work
governance
performed, or to be performed, by the
 The independence of the internal auditor
internal auditors.
is not the same as the independence
 The assessed risks of material
required to the external auditor when
misstatement at the assertion level for
expressing an opinion on the FS.
classes of transactions, account
External auditor should determine Whether, and balances, and disclosures; and
to what extent, to use specific work of the  The degree of subjectivity involved in
internal auditors; and if so, whether such work is the evaluation of the audit evidence
adequate for the purposes of the audit. gathered by the internal auditors in
Definitions support of the relevant assertions.

 internal audit function is an appraisal Using specific work of the internal auditors
activity established or provided as a  The external auditor should determine
service to the entity. Its functions include the adequacy of the internal auditor’s
examining, evaluating and monitoring work.
the adequacy and effectiveness of  To determine the adequacy of specific
internal control. work performed by the internal auditors,
 Internal auditors are individuals who the external auditor shall evaluate
perform activities of the internal audit whether: the internal auditors has
function. Internal auditors may belong to adequate technical training and
an internal audit department or proficiency, the work was properly
equivalent function supervised, reviewed and documented,
Requirements: there’s an adequate audit evidence to
base the internal auditor’s conclusions,
The external auditor should determine if the the conclusions should be consistent
work of internal auditor is likely to be adequate with the results of the work performed,
for purposes of the audit and if so the planned any exceptions and unusual matters
effect of the work of the internal auditors on the disclosed are resolved by the internal
nature, timing or extent of the external auditor’s auditors.
procedures.
To determine if the work of internal auditor is
likely to be adequate for purposes of the audit,
the external auditor shall evaluate:
 the objectivity of internal audit function
Documentation
 The external auditor should document
the conclusions regarding the evaluation
of the adequacy of the work of internal
auditors and the audit procedures
performed on that work.
Application and Other Explanatory Material
 Internal audit function: Monitoring of
internal control, Examination of financial
and operating information, Review of
operating activities, Review of
compliance with laws and regulations,
Risk management, Governance
 In determining the nature, timing or
extent of the external auditor’s
procedures, it may be useful to agree in
advance the ff. matters with internal
auditors: timing of work, extent of audit
coverage, Materiality for the financial
statements as a whole and performance
materiality, proposed methods of item
selection, documentation of the work
performed and review and reporting
procedures.
 Audit procedures to assess the
evaluation of the internal auditor include:
Examination of items already examined
by the internal auditors; Examination of
other similar items; and Observation of
procedures performed by the internal
auditors.

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