Week 6 - Relationship between Internal and External Audit

Question 1

Using the work of internal auditors requires that external auditors obtain a thorough understanding of internal audit function so as to

Answer 1

• assist in the planning of audit work
• determine the degree of reliance on internal audit

Question 2

What can external auditors do to establish if internal audit is independent?

Answer 2

Ask questions

Question 3

Scope and pattern

Answer 3

Can it decide its own pattern and scope of work - yes, then independent

Question 4

Access

Answer 4

Does it have unrestricted access to all records and staff, and to senior management - yes, then independent

Question 5

Head of internal audit

Answer 5

Is the head of internal audit holding a senior position, independent of the financial director - yes, then independent

Question 6

Operational activities

Answer 6

Is it free from any operational activities (e.g finance department) - yes, then independent

Question 7

Communication

Answer 7

Can it communicate freely with external audit - yes, then independent

Question 8

Resource

Answer 8

Is team adequately resourced - yes, then independent

Question 9

Competency

Answer 9

How competent is the internal audit function - professional qualifications, continued training - high, then independent

Question 10

Recommendations

Answer 10

Are internal audit recommendations effectively implemented - yes, then independent

Question 11

What are the first 4 things the external audit can ask about the internal audit?

Answer 11

• scope and pattern
• access
• head of internal audit
• operational activities

Question 12

What are the other 4 things the external audit can ask about the internal audit?

Answer 12

• communication
• resource
• competency
• recommendations

Question 13

What can we do once the internal audits independence is established?

Answer 13

Consider the planned audit work