ISA 610 - (Revised) Using the Work of Internal Auditors

Question 1

ISA 610: (Revised) Using the work of Internal Auditors:

Answer 1

> It is a conditional Standard where the Applicability of the is only when there is an Internal Audit function.

What is Internal Audit Function?
> It is part of management functions.
> It is established for the purpose of 3 things:
* For the purpose of Evaluation of Governance Structure.
* Evaluation of Risk management policy.
* Evaluation of Internal Control Systems.

This function can be occupied by Internal Employees or be outsourced.

Question 2

ISA 610: Responsibility of External Auditor:

Answer 2

For an Entity having Internal Audit Function:
> The Auditor (External) Check whether to use the work done by the Internal Auditors .
> The Auditor also checks the Nature & Extent of the work.
> Auditor evaluates whether work used is sufficient enough for the purpose of Audit.
> If Auditor do not want to use work performed by Internal Auditor,
> Can directly use them for assistance for the purpose of Audit.
> Responsibility of Audit Opinion will rest only on External Auditor.

Question 3

ISA 610: Audit Procedures, in two scenarios:

Answer 3

1. Decide to use the work of Internal Auditors: Audit Procedures:
   > Evaluate Internal Audit Function,
   * Look into the Objectivity of the Internal Audit.
   * Check the Competence of the Internal Audit team.
   * Systematic & Disciplined work., good work that is documented and Systematic.
   > Decide Nature, & Extent of usage of work.
   * Do not excessively use the work of Internal Auditors.
   * Involvement
   * Communication to TCWG.
   > Other Audit Procedures:
   * Discussion on level of work used.
   * Evaluation of reports.
   After examining their work, there might be need for further Procedures.
   > Additional Audit Procedures:
   Factors:
   * Risk of Material Misstatements.
   * Significant Judgements.
2. Decided to use them as direct assistance:
   Taking the direct assistance of Internal Auditors:
   > Evaluation of whether Internal Auditors can be used for the purpose of the work.
   * Check if there is any Threat to their Objectivity,
   * Competence of the Internal Auditors, do they have the required qualifications and knowledge?
   > If yes, determine the Nature & to what Extent can be used?
   * Judgement Involvement,
   * Risk of Material Misstatements,
   * Objectivity?
   > What Audit Procedures to be followed?

> Do not excessively use the work of Internal Auditor.
Thoroughly involve yourself in the Audit Procedures.
Once you resolve to use the work of the Internal Auditor, Communicate Planned Work, Nature & Extent of usage of work to TCWG.

Direct Assistance of Internal Auditors can not be taken:
> When Significant Judgement are involved,
> Where the Risk of Material Misstatements is very high.
> Work is performed by Internal Auditors as part of management.
> Where there is threat to Objectivity or no Competence.

• All this has to be communicated to TCWG as per ISA260.

Question 4

ISA 610: Two Agreements to be signed:

Answer 4

1. Agreement with Management:
   > To allow Internal Auditors to provide assistance.
   > And that management will not interfere in workflow.
2. Agreement with Internal Auditors:
   > To maintain confidentiality in all the work they shall do.
   > Will be completely under the supervision of the external Auditor.

Question 5

ISA 610: Documentation:

Answer 5

> Simply write the Procedures that you followed during the course of the Audit work with Internal Auditors as part of the Documentation.