Page 68 - CA Final PARAM Digital Book.

Answer Part I -- Relevant Standards & Laws
▪ SA 610 – “Using Work Of the Internal Auditor”

Part II -- Requirements of Relevant Standards & Laws
➢ Auditor Shall Not Take Direct Assistance: -
• Higher RMM / Significant Judgments in Audit / Areas Where Internal Auditors
are Involved & it Includes Reporting to TCWG or Management / Decisions Under
SA 610 regarding Internal Audit
The external auditor shall not use internal auditors to provide direct assistance to perform
procedures that:
• Relate to higher assessed risks of material misstatement where the judgment
required in performing the relevant audit procedures or evaluating the audit
evidence gathered is more than limited;
• Involve making significant judgments in the audit;
• Relate to work with which the internal auditors have been involved and which has
already been, or will be, reported to management or those charged with
governance by the internal audit function; or
• Relate to decisions the external auditor makes in accordance with SA 610
regarding the internal audit function and the use of its work or direct assistance.

➢ Significant Judgement Includes:
• Assessing RMM / Evaluation of-Adequacy of Test Performed Significant Acc.
Estimates / Disclosure Requirement / Going Concern Assumption
Significant judgments include the following: (GRADES)
• Assessing the risks of material misstatement
• Evaluating the sufficiency of tests performed;
• Evaluating significant accounting estimates; and
• Evaluating the adequacy of disclosures in the financial statements, and other
matters affecting the auditor’s report.
• Evaluating the appropriateness of management’s use of the going concern
assumption;

➢ External auditor should make significant judgments as External auditor has sole
responsibility for the audit opinion expressed,
Since the external auditor has sole responsibility for the audit opinion expressed, the external
auditor needs to make the significant judgments in the audit engagement.

Part III –Facts
➢ Mr Anand(E.A) asked I.A to provide direct assistance on evaluating significant Acc. estimates &
assessing the RMM.

Part IV –Conclusion
➢ External Auditor cannot take direct assistance from internal auditors.
In view of above, Mr. Anand cannot ask direct assistance from internal auditors regarding evaluating
significant accounting estimates and assessing the risk of material misstatements.

Author’s Note: include the following audit documentation points in the answer.

If the external auditor uses internal auditors to provide direct assistance on the audit, the external auditor
shall include in the audit documentation:
(1) The evaluation of the existence and significance of threats to the objectivity of the internal auditors,
and the level of competence of the internal auditors used to provide direct assistance;
(2) The basis for the decision regarding the nature and extent of the work performed by the internal
auditors;
(3) Who reviewed the work performed and the date and extent of that review in accordance with SA 230,
Audit Documentation;
(4) The written agreements obtained from an authorized representative of the entity and the internal
auditors; and
(5) The working papers prepared by the internal auditors who provided direct assistance on the audit
engagement.

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