AUD 2 - Using the Work of Others

Question 1

Define a client’s internal auditor as they relate to judgments and independence?

Answer 1

A client’s internal auditor:

1) Must maintain objectivity and integrity
2) They cannot make judgement (CPA/external auditor(us) must decide)
3) NOT INDEPENDENT

External auditor (us):

CANNOT share with the internal auditor any of the responsibility for audit decisions, judgments, or assessments

Question 2

What to consider when using internal auditors for help?

Answer 2

1) To whom does the internal auditor report to (e.g. if internal auditor reports to the controller, then there’s a problem; but if internal auditor reports to the audit committee, then you can assume they’re good)
2) For assertions related to MATERIAL financial statement amounts with a high rise, internal auditor’s work alone cannot eliminate direct testing by the CPA

Question 3

Who is the auditor’s specialist?

Answer 3

• Treat the specialist as if they are your staff.
• May be an internal specialist EMPLOYED by the auditor’s firm, OR a network firm, OR an external specialist
• Auditor must be satisfied as to the professional competence, capabilities, and objectivity

Question 4

Who is the management’s specialist?

Answer 4

• Treat the specialist as if they are your staff

- Except: they are not independent and therefore there is no judgment to final determinations