Chapter 12: ISA 610 - Using the work of Internal Auditor

Question 1

Benefits of internal audit (3+3)

Answer 1

1. Improvement in
   - financial/operational controls within the entity.
   - compliance with key laws and regulations
   - economy, efficiency, or effectiveness of operations
2. External auditors may decide to use work done by internal auditors.
3. Existence of an internal audit department may enhance reputation of the entity.

Question 2

Limitations of internal audit (4)

Answer 2

1. No legal requirements for internal auditors to be professionally qualified for internal audit.
2. Qualification/Experience requirement is a matter for entity to set up int. audit dept.
3. Cost of Internal audit function.
4. Problems arising when ensuring independence of internal auditors.

Question 3

Criteria to evaluate objectivity/independence of an internal audit function. (6)

Answer 3

1. Chief Internal Auditor = reportable to TCWG, not to management
2. Scope of work determined by TCWG, not management
3. Employment decisions by TCWG, not management
4. Internal audit function should not have conflicting responsibilities
5. Rotated periodically
6. No restricitons/limitations

Question 4

Criteria to evaluate competence of an internal audit function (3)

Answer 4

1. Education, professional qualification, experience
2. established practices for training and hiring
3. adequately resourced

Question 5

Criteria to evaluate systematic and disciplined approach of an internal audit function. (2)

Answer 5

1. The work of auditor is properly planned, performed, supervised, documented, and reviewed
2. IA function has appropriate quality controls, ensuring good quality audit programs and working papers

Question 6

when to use less work of internal audit function (2)

Answer 6

1. More risk and judgement involved
2. Concerns about objectivity/competence

Question 7

Evaluation of the WORK of Internal audit function (4)

Answer 7

1. Work was properly planned, performed, supervised, documented and reviewed
2. Sufficient appropriate evidence was obtained to draw conclusions
3. Appropriate conclusions were reached supported by other reports
4. Exceptions/unusual matters were properly resolved

Question 8

Procedures for Evaluation of the WORK of ia function. (4)

Answer 8

1. reperformance on sample
2. inquiry of ia
3. observation of procedures by IA
4. inspection of working papers