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)
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Criteria to be considered when assessing whether to place reliance on internal audit work include the following:
Objectivity of function
The external auditor should consider whom the internal auditors report to and whether they are subject to any conflicting responsibilities, constraints or restrictions. This will affect the capability of the internal auditors to communicate significant matters openly.
Scope of function
The external auditors should consider the extent and nature of assignments performed by the internal auditors and the action taken by management as a result of internal audit reports.
Technical Competence
The external auditors should consider whether the internal auditors have adequate technical training and proficiency.
Due professional care
The external auditors should consider whether the work of internal audit is properly planned, supervised, reviewed and documented.