SA 610 Using the Work of Internal Auditors deals with the external auditor’s responsibilities in relation to the internal auditor’s work if the internal audit function is likely to be relevant to the audit.

1. Scope

SA 610 is not applicable when an individual internal auditor provides direct assistance to external auditor for audit procedures and the applicable legal & regulatory framework restricts accessing internal auditor’s working papers

2. Objective

If an entity has an internal audit function and its relevance to the external auditor’s work, then the external auditor should determine:

A. If the specific work of the internal auditor can be used and if so, to what extent

B. Such work is adequate for the audit purpose

SA 610 Using the Work of Internal Auditors is effective for an audit of financial statements for periods beginning on or after 1st April 2010

3. Definition

Internal Audit Function – “An appraisal activity established or provided as a service to the entity. Its function includes, amongst other things, examining, evaluating and monitoring the adequacy and effectiveness of internal control”

4. The relationship between Internal Auditor and External Auditor

Particulars Internal Audit Function/ Internal Auditor

External Auditor

Role and Scope Determined by the management Statutory and defined by the applicable law and regulation
Objective/ Functions Set by the management and different from the external auditor Different objectives but some functions performed  to achieve objective may be similar
IIndependence& Responsibility Not independent of the entity irrespective of the degree of autonomy and objectivity Sole responsibility for the audit opinion expressed and not reduced by the use of internal auditor’s work

5. Whether and to What Extent to Use of Internal Auditor Work

External auditor should determine:

A. If the internal auditor’s work is adequate for audit purpose and evaluate:

i. Objectivity of internal audit function

ii. Internal auditor’s technical competence

iii. Internal auditor’s work is carried out with professional care

iv. Effective communication between the internal auditor and the external auditor

B. Planned effect of internal auditor’s work on the nature, timing or extent of external auditor’s procedures and consider:

i. Nature and scope of specific work performed or to be performed

ii. Assessed risk of material misstatement at the assertion level for a particular class of transaction, account balance and disclosure

iii. The degree of subjectivity involved in evaluating the audit evidence to support the relevant assertions

Example of the internal auditor’s work:

a. Examining of financial and operating information

b. Monitoring and reviewing of internal controls

c. Risk management

d. Review of compliance with laws and regulation etc

6. Specific work of Internal Auditor & Documentation

To use the work of the internal auditors, external auditor should evaluate and perform audit procedures in that work to determine its adequacy if:

i. Work performed exhibits adequate technical training and proficiency

ii. Properly supervised, reviewed and documented

iii. Sufficient audit evidence has been obtained to draw reasonable conclusions

iv. Conclusions reached are appropriate

v. Reports are consistent with the working papers

vi. Exceptions or unusual matters, if any are properly resolved

The External auditor should perform all the above-mentioned procedures and document the same.
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