Using the Work of an Internal Audit Function

Question 1

What is Internal Audit Function?

Answer 1

A function of an entity that performs assurance and consulting activities designed to evaluate and improve the effectiveness of the entity’s governance, risk management, and internal control processes

Question 2

What are the Two Ways to Use the Work of an Internal Audit Function?

Answer 2

1 Obtain audit evidence that modifies the nature, timing, or extent of audit procedures to be performed by the external auditor
2 Provide direct assistance to the external auditor under the external auditor’s direction, supervision, and review

Question 3

What does Using the internal audit function to obtain audit evidence mean?

Answer 3

It means substituting the internal auditors’ work (related to tests of controls and/or substantive procedures) in place of work that would otherwise be performed by the external auditor

Question 4

What are the 3 necessary conditions before using the Internal Audit Function?

Answer 4

1 Objectivity
2 Competence
3 Systematic and disciplined approach

Question 5

What’s the Objectivity regarding a condition before using the Internal Audit Function?

Answer 5

The internal audit function’s organizational status (dealing with the level to whom the function reports, such as those charged with governance, rather than middle management) and relevant policies and procedures must support the objectivity of the internal auditors

Question 6

What’s Competence regarding a condition before using the Internal Audit Function?

Answer 6

The internal auditors must be competent (related to their education, experience, certification, etc.) to perform reliable work

Question 7

What’s the Systematic and Disciplined approach regarding a condition before using the Internal Audit Function?

Answer 7

Should not rely on “internal audit–like” work that is conducted in an informal, unstructured, or ad hoc way

Question 8

Significant judgments should be made by who?

Answer 8

The external auditor

Question 9

What procedures should be performed by the external auditor when using the work of the internal audit function?

Answer 9

1 Should read the internal audit function’s reports
2 perform procedures to determine whether the internal audit function’s work was adequate
3 Reperform some of the internal audit function’s work that the external auditor plans to use