Page 56 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
The objectives and scope of internal audit functions:
The objectives and scope of internal audit functions typically include assurance and consulting activities
designed to evaluate and improve the effectiveness of the entity’s governance processes, risk management and
internal control such as
the following:
Activities Relating to Governance: The internal audit function may assess the governance process in its
accomplishment of objectives on :
• Performance management and accountability,
• ethics and values
• communicating risk and control information.
Activities Relating to Risk Management
• The internal audit function may assist the entity by identifying and evaluating significant exposures to risk.
•The internal audit function may perform procedures to assist the entity in the detection of fraud.
Activities Relating to Internal Control
Evaluation of internal control (Any Other)
a. Review of compliance with laws and regulations.
b. Controls related to safeguarding assets.
c. Review of operating activities.
d. Examination of financial and operating information

Using Work of Internal Auditor

(CNO-SA610.080) Evaluating Whether Work of The Internal Audit Function Can Be Used For Purposes
Of The Audit
Step 1: - The external auditor shall determine whether the work of the internal audit function can be
used for purposes of the audit by evaluating the following:
(Shortcut: COD)
Level of Competence: Assess the level of competence of the internal audit function in order to determine its
usefulness for the external audit.
Objectivity of the Internal Auditors: Evaluate the extent to which the internal audit function's
organizational status and relevant policies and procedures support the objectivity of the internal auditors.
Systematic and Disciplined Approach: Determine whether the internal audit function applies a systematic
and disciplined approach in its work, including quality control measures.
The external auditor shall not use the work of the internal audit function if the external auditor
determines that:
Level of Competence: The internal audit function do not possess sufficient competence.
Objectivity of the Internal Auditors: The organizational status and relevant policies and procedures of the
internal audit function do not adequately support the objectivity of internal auditors.
Systematic and Disciplined Approach: The internal audit function do not apply a systematic and disciplined
approach, including quality control.

(CNO-SA610.100) Step 2: - Determining the Nature and Extent of Work Of The Internal Audit Function
That Can Be Used
The external auditor shall consider the nature and scope of the work performed by Internal audit function.
Examples of Work of the internal audit function that can be used by the external auditor include the following:
FAP
1A. TOC: Testing of the operating effectiveness of controls.
1B. SAP: Substantive procedures involving limited judgment.

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