Page 140 - AAA Integrated Workbook STUDENT S18-J19

Chapter 93 4

3.3 Using internal audit to provide direct assistance

External auditors can consider using the internal auditor to provide direct assistance
with gathering audit evidence under the supervision and review of the external
auditor.

The following considerations will be made:

 Direct assistance cannot be provided where laws and regulations prohibit such
assistance.

 The competence and objectivity of the internal auditor. Where threats to
objectivity are present, the significance of them and whether they can be
managed to an acceptable level must be considered.

 The external auditor must not assign work to the internal auditor which involves
significant judgement, a high risk of material misstatement or with which the
internal auditor has been involved.

 The planned work must be communicated with those charged with governance
so agreement can be made that the use of the internal auditor is not excessive.

Where it is agreed that the internal auditor can provide direct assistance:

 Management must agree in writing that the internal auditor can provide such
assistance and that they will not intervene in that work.

 The internal auditors must provide written confirmation that they will keep the
external auditor's information confidential.

 The external auditor will provide direction, supervision and review of the internal
auditor's work.

 During the direction, supervision and review of the work, the external auditor
should remain alert to the risk that the internal auditor is not objective or
competent.

Examples of work that the internal auditor may perform:

 Testing of the operating effectiveness of controls.

 Substantive procedures involving limited judgment.

 Observations of inventory counts.

 Tracing transactions through the information system relevant to financial
reporting.

 Testing of compliance with regulatory requirements.

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