Determining Whether, in Which Areas, andDetermining Whether, in Which Areas, and to What Extent the Work of the Internal Audit Function Can Be Used

Determining Whether, in Which Areas, and to What Extent the Work of the Internal Audit Function Can Be Used

Evaluating the Internal Audit Function

1. The external auditor shall determine whether the work of the internal audit function can be used for purposes of the audit by evaluating the following:
   1. The extent to which the internal audit function’s organisational status and relevant policies and procedures support the objectivity of the internal auditors; (Ref: Para. A5‑A9)
   2. The level of competence of the internal audit function; and (Ref: Para. A5–A9)
   3. Whether the internal audit function applies a systematic and disciplined approach, including quality control. (Ref: Para. A10–A11)
2. The external auditor shall not use the work of the internal audit function if the external auditor determines that:
   1. The function’s organisational status and relevant policies and procedures do not adequately support the objectivity of internal auditors;
   2. The function lacks sufficient competence; or
   3. The function does not apply a systematic and disciplined approach, including quality control. (Ref: Para. A12–A14)

Determining the Nature and Extent of Work of the Internal Audit Function that Can Be Used

1. As a basis for determining the areas and the extent to which the work of the internal audit function can be used, the external auditor shall consider the nature and scope of the work that has been performed, or is planned to be performed, by the internal audit function and its relevance to the external auditor’s overall audit strategy and audit plan. (Ref: Para. A15–A17)
2. The external auditor shall make all significant judgements in the audit engagement and, to prevent undue use of the work of the internal audit function, shall plan to use less of the work of the function and perform more of the work directly: (Ref: Para. A15–A17)
   1. The more judgement is involved in:
      1. Planning and performing relevant audit procedures; and
      2. Evaluating the audit evidence gathered; (Ref: Para. A18–A19)
   2. The higher the assessed risk of material misstatement at the assertion level, with special consideration given to risks identified as significant; (Ref: Para. A20–A22)
   3. The less the internal audit function’s organisational status and relevant policies and procedures adequately support the objectivity of the internal auditors; and
   4. The lower the level of competence of the internal audit function.
3. The external auditor shall also evaluate whether, in aggregate, using the work of the internal audit function to the extent planned would still result in the external auditor being sufficiently involved in the audit, given the external auditor’s sole responsibility for the audit opinion expressed. (Ref: Para. A15–A22)