Page 57 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
Specific
2A. Inventory Counting: Observations of inventory counts.
2B. Tracing Transactions: Tracing transactions through the information system relevant to financial reporting.
Imp
3A. Compliance with Law: Testing of compliance with regulatory requirements.
3B. Subsidiaries: Audits or reviews of the financial information of subsidiaries that are not significant
components to the group (where this does not conflict with the requirements of SA 600)
Which work Internal Auditor Can be Used?
Prohibition
1. Prohibition: The external auditor shall make all significant judgments in the audit engagement
Prevention
2. Prevent Undue Use: To prevent undue use of the work of the internal audit function shall plan to use less of
the work of the function and perform more of the work directly
2A. More judgment is involved: More judgment is involved in planning and performing relevant audit
procedures and evaluating the audit evidence gathered.
2B. Higher Risk of Material Misstatement: The higher the assessed risk of material misstatement at the
assertion level, the more the external auditor should consider risks identified as significant.
Steps
3A. Level of Competence: The lower the level of competence of the internal audit function, the more the
external auditor should perform the work directly.
3B. Objectivity of Internal Auditor: The less the internal audit function’s organizational status and relevant
policies and procedures adequately support the objectivity of the internal auditors, the more the external
auditor should rely on their own work.
Extent of involvement of external auditor:
Evaluate Involvement: The external auditor should evaluate their level of involvement in the audit.
Sufficient Involvement: The external auditor should assess whether using the work of the internal audit
function to the planned extent would still allow for sufficient involvement.
Because of Sole responsibility: The external auditor bears sole responsibility for the audit opinion expressed.
Communicate how the external auditor has planned to use the work of the internal audit function:
Communicate to TCWG: The external auditor should communicate with those charged with governance.
Overview: The external auditor should provide an overview of the planned scope and timing of the audit in
accordance with SA 260.
Planned use of Internal Audit Function: The external auditor should communicate how they have planned
to use the work of the internal audit function.

(CNO-SA610.120) Step 3: Using The Work Of The Internal Audit Function
Steps
1A. Discuss and coordinate: External auditors should discuss and coordinate with the internal audit function
if they plan to use its work.
1B. Read internal audit Report: External auditors should read internal audit reports to understand the nature,
extent, and findings of the audit procedures performed.
1C. Perform Sufficient Audit Procedures: External auditors should assess the adequacy of the internal audit
function, including the planning, performance, supervision, review, documentation, evidence obtained, and the
appropriateness of conclusions.
Principles
2A. Responsiveness of Audit Procedures: The external auditor's procedures should respond to their
evaluation of the judgment involved, risk of material misstatement, support for internal auditor objectivity, and
the competence level of the internal audit function.
2B. Re-evaluation & Reperformances: External auditors should regularly reassess their conclusions about the
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