Independent Internal Auditors Analysis

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Introduction Independent external auditors have primary responsibility to the performance of the audit function on published financial statements. In performing their audits the independent external auditor might rely on the work of other auditors. Relying on the work of other auditors is a widely accepted and applied audit practice and relevant internationally accepted audit standards have been developed so as to ensure a common understanding of the general principles involved. International Standard on Auditing (ISA) 600 concerns the use of the work of another external auditor, ISA 610 covers the theme of considering the work of the internal auditor and ISA 620 concerns the use of the work of an expert. ISA 601 states the external auditor’s…show more content…
Evidence gathered from empirical studies indicates an increasing trend in internal audit providing support for external audit (Felix et al., 2001). Advocates for higher levels of internal audit participation and contribution to the external audit argue that this participation is beneficial for the external auditors. External auditors may utilize the experience of the internal auditors to reduce the duplication of work and, in effect, the cost of the external audit, furthermore internal auditors can help external auditors understand the firm’s internal control system and the level of compliance with it. When an external auditor uses the work of an internal auditor, the external auditor retains the responsibilities associated with the issuance of the auditor’s report as stated in ISA 610. External auditors’ reliance on internal audit work could produce a significant cost saving through reduction of external audit time. External auditors assess internal auditor’s work to determine the extent of their reliance on internal audit and are influenced in their choice when doing this assessment. This leads to the main question of this paper: ‘’what influences the choices of the external auditor whether and to what extend to rely on the work of…show more content…
The objectives of the internal auditor and the external auditor are different, but some ways in which the internal auditor and the external auditor achieve their respective objectives may be similar. Irrespective of the degree of autonomy and objectivity of the internal auditor, the internal auditor is not independent of the entity as is required of the external auditor when expressing an opinion on financial statements (ISA 610, 2013). The external auditor has sole responsibility for the audit opinion expressed, and that responsibility is not reduced by the external auditor’s use of the work of the internal auditors. Therefore, before using the work of the internal auditor, the external auditor should assess whether the internal audit function meets certain criteria and standards, and he should therefore evaluate (part of) the work of the internal

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