Using the Work of Internal Auditors

1 Using the Work of Internal Auditors941AU-C Section 610 Using the Work of Internal AuditorsSource: SAS No. for audits of financial statements for periods ending on orafter December 15, of This section addresses the external auditor's responsibilities if usingthe work of Internal Auditors . Using the work of Internal Auditors includes (a) Using the work of the Internal audit function in obtaining audit evidence and(b) Using Internal Auditors to provide direct assistance under the direction, su-pervision, and review of the external section does not apply if the entity does not have an Internal auditfunction.

2 (Ref: par..A1 .A2).03If the entity has an Internal audit function, the requirements in thissection relating to Using the work of the Internal audit function in obtainingaudit evidence do not apply responsibilities and activities of the function are not relevantto the audit, on the external auditor's preliminary understanding of thefunction obtained as a result of procedures performed under sec-tion 315,Understanding the Entity and Its Environment and As-sessing the Risks of Material Misstatement, the external auditordoes not expect to use the work of the function in obtaining in this section requires the external auditor to use the work of theinternal audit function to modify the nature or timing, or reduce the extent, ofaudit procedures to be performed directly by the external auditor.

3 It remainsthe external auditor's decision to establish the overall audit , the requirements in this section relating to Using inter-nal Auditors to provide direct assistance do not apply if the external auditordoes not plan to use Internal Auditors to provide direct Between Section 315 and This entities establish Internal audit functions as part of their inter-nal control and governance structures. The objectives and scope of an internalaudit function, the nature of its responsibilities, and its organizational status,including the function's authority and accountability, vary widely and dependon the size and structure of the entity and the requirements of managementand those charged with governance.

4 Section 315 addresses how the knowledgeand experience of the Internal audit function can inform the external auditor's 2021, AICPAAU-C the Work of Othersunderstanding of the entity and its environment and identification and assess-ment of risks of material misstatement. Section 3151also explains how effectivecommunication between the Internal and external Auditors creates an environ-ment in which the external auditor can be informed by the Internal auditor ofsignificant matters that may affect the external auditor's external auditor may be able to use the work of the Internal au-dit function in obtaining audit evidence in a constructive and complementarymanner depending on the level of competency of the Internal audit function.

5 Whether the Internal audit function's organizational status andrelevant policies and procedures adequately support the objectiv-ity of the Internal Auditors , and whether the function applies a systematic and disciplined ap-proach, including quality section addresses the external auditor's responsibilities when, based onthe external auditor's understanding of the Internal audit function obtained asa result of procedures performed under section 315, the external auditor expectsto use the work of the Internal audit function in obtaining audit evidence (seeparagraphs .13 .24 of this section).

6 Such use of that work modifies the natureor timing, or reduces the extent, of audit procedures to be performed directlyby the external section also addresses the external auditor's responsibilities if theexternal auditor is considering Using Internal Auditors to provide direct assis-tance under the direction, supervision, and review of the external auditor (seeparagraphs .25 .32)..08 There may be individuals in an entity that perform procedures similarto those performed by an Internal audit function. However, unless performed byan objective and competent function that applies a systematic and disciplinedapproach, including quality control, such procedures would be considered con-trol activities, and obtaining evidence regarding the effectiveness of such con-trols would be part of the external auditor's responses to assessed risks in accor-dance with section 330,Performing Audit Procedures in Response to AssessedRisks and Evaluating the Audit Evidence External Auditor s Responsibility for the external auditor has sole responsibility for the audit opinion ex-pressed.

7 And that responsibility is not reduced by the external auditor's useof the work of the Internal audit function in obtaining audit evidence or useof Internal Auditors to provide direct assistance on the engagement. Althoughthe function may perform audit procedures similar to those performed by theexternal auditor, neither the Internal audit function nor the Internal auditorsare independent of the entity as is required of the external auditor in an au-dit of financial statements in accordance with section 200,Overall Objectivesof the Independent Auditor and the Conduct of an Audit in Accordance WithGenerally Accepted Auditing section, therefore, defines the1 Paragraph.

8 A120 of section 315,Understanding the Entity and Its Environment and Assessingthe Risks of Material .15 of section 200,Overall Objectives of the Independent Auditor and the Conduct ofan Audit in Accordance With Generally Accepted Auditing 2021, AICPAU sing the Work of Internal Auditors943conditions that are necessary for the external auditor to be able to use the workof Internal Auditors . It also defines the necessary work effort to obtain sufficientappropriate evidence that the work of the Internal audit function or internalauditors providing direct assistance is adequate for the purposes of the requirements are designed to provide a framework for the external audi-tor's judgments regarding the use of the work of Internal Auditors to preventover or undue use of such section is effective for audits of financial statements for periodsending on or after December 15, objectives of the external auditor.

9 When the entity has an internalaudit function and the external auditor expects to use the work of Internal au-ditors to modify the nature or timing, or reduce the extent, of audit proceduresto be performed directly by the external auditor, are as determine whether to use the work of the Internal audit func-tion in obtaining audit evidence or to use Internal Auditors to pro-vide direct assistance, and if so, in which areas and to what Using the work of the Internal audit function in obtaining auditevidence, to determine whether that work is adequate for pur-poses of the Using Internal Auditors to provide direct assistance, to appro-priately direct, supervise, and review their purposes of generally accepted auditing standards, the followingterms have the meaning attributed as follows.

10 Direct use of Internal Auditors to perform auditprocedures under the direction, supervision, and review of the ex-ternal audit function of an entity that performsassurance and consulting activities designed to evaluate and im-prove the effectiveness of the entity's governance, risk manage-ment, and Internal control processes. (Ref: par..A1 .A4)RequirementsDetermining Whether, in Which Areas, and to What Extent theWork of the Internal Audit Function Can Be Used in ObtainingAudit EvidenceEvaluating the Internal Audit external auditor should determine whether the work of the inter-nal audit function can be used in obtaining audit evidence by evaluating 2021, AICPAAU-C the Work of extent to which the Internal audit function's organizationalstatus and relevant policies and procedures support the objectiv-ity of the Internal Auditors ; (Ref: par.)