Page 58 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
internal audit function and the extent of its work used for the audit. (At least some work should be
reperformed)

Taking Direct Assistance

(CNO-SA610.140) Step 1: - Determining Whether Internal Auditors Can Be Used To Provide Direct
Assistance For Purposes Of The Audit

Situation 1: - The external auditor prohibited from obtaining direct assistance from internal auditors
In case where the external auditor is prohibited by law or regulation from using internal auditors to provide
direct assistance, it is relevant for the principal auditors to consider whether the prohibition also extends to
component auditors.
and, if so, to address this in the communication to the component auditors.
Situation 2: - Using internal auditors to provide direct assistance is not prohibited
1.Level of Competence & Objectivity: The external auditor should evaluate the existence and significance of
threats to the objectivity and competence of internal auditors.
2A. Objectivity: Objectivity refers to the ability to perform work without bias, conflict of interest, or undue
influence from others.
2B. Interests and Relationships: The external auditor should inquire about the interests and relationships of
the internal auditors that may create a threat to their objectivity.
2C. In evaluating the existence and significance of threats to the objectivity of an internal auditor, the
following factors may be relevant:
Shortcut: ROSA
Relationships: Any family or personal relationships with an individual who works in or holds responsibility
for the specific area of the organization that the auditor is examining.
Organizational Status & Policies: The degree to which the internal audit function's organizational status and
applicable policies and procedures uphold the objectivity of the internal auditors.
Significant Financial Interests: Any significant financial interests in the organization, apart from regular
compensation that is consistent with what other employees at a similar level of seniority receive.
Association: Any association with the division or department within the organization that is relevant to the
auditor's work.

The external auditor shall not use an internal auditor to provide direct assistance if:
Level of Competence: The internal auditor lacks sufficient competence to perform the proposed work. As the
function of Internal Auditor is again a concept of evaluation of Internal Control mechanism, it would amount
to weaknesses in Internal Control System in case internal auditor does not apply required test procedures
considering the Materiality aspects. This would in turn result in Higher Audit Risks.
Objectivity: There are significant threats to the objectivity of the internal auditor.

Step 2: - Determining the Nature and Extent of Work that Can Be Assigned to Internal Auditors
Providing Direct Assistance:
Determining Work to be assigned for Internal Auditors
1. Criteria: External auditor considerations include:
1A. Judgment: In both planning and performing audit procedures, and in evaluating audit evidence.
1B. Risk: Assessed risk of material misstatement.
1C. Level of Competence & Objectivity: Existence and significance of threats to objectivity and
competence of internal auditors.
2. Restrictions: External auditors shouldn't use internal auditors for:
2A. Significant Judgments: Tasks involving major audit decisions.
2B. High Risks: Tasks with high assessed risks where more than limited judgment is necessary.
2C. Prior Involvement: Tasks that the internal auditors have reported or will report to management or
governance bodies.

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