Using the Work of others

Question 1

what is a difference between the audit of independent auditor and internal auditor’s comprehensive internal audit program?

Answer 1

• internal auditor’s audit covers more detailed and more areas than those of the independent auditors. ex: the internal auditors would be more involved in analyzing and reporting on the actual operations of the entity of which they are a part.
• independent auditor’s concerns are limited to areas materially affecting the FS taken as a whole

Question 2

what areas that the internal auditor’s work may affect the independent auditor?

Answer 2

1. affect the procedures performed in obtaining and understanding of INTERNAL CONTROL
2. affect the procedures performed in ASSESSING THE RISK of material misstatement
3. affect the SUBSTANTIVE PROCEDURES performed in gathering direct evidence

Although internal auditor is allowed to assist the external auditor, their responsibility should be limited

Question 3

what is the general rule regarding using the work of others?

Answer 3

• independent auditors may use the work of others if the work is required little subjectivity/risk of material misstatement (internal auditor) or special skills/knowledge (specialists) but external auditor should supervise, review, evaluate, and test their work
• independent auditors may NEVER share responsibility for the audit report with either a specialist or an internal auditor, regardless of whether either of those parties are competence and objective.

Question 4

what criteria about internal auditor that the external auditor may use them as assistance?

Answer 4

1. Competence: determine the educational level, professional experience, performance evaluations, the audit plan, audit procedures, and the quality of internal audit documentation.
2. Objectivity: is reflected by the organizational level to which the internal auditor report and by policies prohibiting audits of areas in which the internal auditor lacks independence
3. Application of a systematic and disciplined approach: is reflected by existence, adequacy, and use of documented internal procedures or guidance covering such areas as risk assessments, work programs, documentation, and reporting

Question 5

In what circumstances the auditor may refer the specialist in the audit report?

Answer 5

if as a result of the work performed by the specialist, the auditor adds explanatory language to or departs from an unmodified opinion. Meaning, no need to reference the work of the specialist when expressing a standard unmodified opinion AND should not divide responsibility for the audit with a specialist