PSA 610

Question 1

The role and objectives of the internal audit function are determined by whom?

Answer 1

management and, where applicable, those charged with governance

Question 2

The objectives of the external auditor, where the entity has an internal audit function that the external auditor has determined is likely to be relevant to the audit, are to determine:

Answer 2

(a) Whether, and to what extent, to use specific work of the internal auditors; and
(b) If so, whether such work is adequate for the purposes of the audit.

Question 3

An appraisal activity established or provided as a service to the entity. Its functions include, amongst other things, examining, evaluating and monitoring the adequacy and effectiveness of internal control.

Answer 3

Internal audit function

Question 4

Those individuals who perform the activities of the internal audit function.

Answer 4

Internal auditors

Question 5

In determining whether the work of the internal auditors is likely to be adequate
for purposes of the audit, the external auditor shall evaluate:

Answer 5

(a) The objectivity of the internal audit function;
(b) The technical competence of the internal auditors;
(c) Whether the work of the internal auditors is likely to be carried out with due professional care; and
(d) Whether there is likely to be effective communication between the internal auditors and the external auditor.

Question 6

In determining the planned effect of the work of the internal auditors on the nature, timing or extent of the external auditor’s procedures, the external auditor shall consider:

Answer 6

(a) The nature and scope of specific work performed, or to be performed, by the internal auditors;
(b) The assessed risks of material misstatement at the assertion level for particular classes of transactions, account balances, and disclosures; and
(c) The degree of subjectivity involved in the evaluation of the audit evidence gathered by the internal auditors in support of the relevant assertions.

Question 7

To determine the adequacy of specific work performed by the internal auditors for
the external auditor’s purposes, the external auditor shall evaluate whether:

Answer 7

(a) The work was performed by internal auditors having adequate technical training and proficiency;
(b) The work was properly supervised, reviewed and documented;
(c) Adequate audit evidence has been obtained to enable the internal auditors to draw reasonable conclusions;
(d) Conclusions reached are appropriate in the circumstances and any reports prepared by the internal auditors are consistent with the results of the work performed; and
(e) Any exceptions or unusual matters disclosed by the internal auditors are properly resolved.

Question 8

When is the entity’s internal audit function likely to be relevant to the audit?

Answer 8

If the nature of the internal audit function’s responsibilities and activities are related to the entity’s financial reporting, and the auditor expects to use the work of the internal auditors to modify the nature or timing, or reduce the extent, of audit procedures to be performed.

Question 9

The activities of the internal audit function may include one or more of the following:

Answer 9

A. Monitoring of internal control
B. Examination of financial and operating information
C. Review of operating activities
D. Risk management
E. Governance

Question 10

Factors that may affect the external auditor’s determination of whether the work of the internal auditors is likely to be adequate for the purposes of the audit include:

Answer 10

Objectivity
Technical competence
Due professional care
Communication

Question 11

PSA 610 does not deal with instances when individual internal auditors provide direct assistance to the external auditor in carrying out audit procedures.

Answer 11

True.