ISA 610 (Revised) — Using the Work of Internal Auditors

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ISA 610 (Revised) DEALS with the external auditor’s responsibilities if USING the work of internal auditors.

ISA 610 (Revised) – Introduction

1. Scope of this ISA

As per ISA 610, the responsibilities INCLUDE (a) Using the work of the internal audit function in obtaining Audit Evidence and (b) Using internal auditors to provide Direct Assistance under the ‘Direction‘, ‘Supervision‘ and ‘Review‘ of the external auditor.

2. Effective Date

This ISA is EFFECTIVE for audits of financial statements for periods ending on or after December 15, 2014.

ISA 610

ISA 610 – Objectives

The Objectives of the ‘External Auditor’ where the entity has an internal audit function are:

  • To DETERMINE whether the work of the internal audit function or direct assistance from internal auditors can be used, and if so, in which areas and to what extent;
  • If using the work of the internal audit function, to determine whether that work is ADEQUATE for purposes of the audit; AND
  • If using internal auditors to provide direct assistance to APPROPRIATELY direct, supervise and review their work.

ISA 610 – Definitions

1. Internal Audit Function

A ‘Function’ of an entity that performs assurance and consulting activities designed to evaluate and improve the EFFECTIVENESS of the entity’s governance, Risk Management and internal control processes.

2. Direct Assistance

The USE of ‘Internal Auditors’ to perform audit procedures under the direction, supervision and review of the external auditor.

ISA 610 – Requirements

1. Determining Whether, in Which Areas, and to What Extent the Work of the Internal Audit Function Can be Used

1.1 Evaluating the Internal Audit Function

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:

(a) The extent to which the internal audit function’s organizational status and relevant policies and procedures support the objectivity of the internal auditors;
(b) The level of competence of the internal audit function; AND
(c) Whether the internal audit function applies a systematic and disciplined approach, including quality control.

1.2 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 that has been performed, or is planned to be performed by the internal audit function and its relevance to the external auditor’s overall Audit Strategy and Audit Plan.

2. Using the Work of the Internal Audit Function

The ‘External Auditor’ shall DISCUSS the planned use of its work with the function as a basis for coordinating their respective activities.

The ‘External Auditor’ shall READ the reports of the internal audit function to OBTAIN an understanding of the nature and extent of audit procedures it performed and the related findings.

The ‘External Auditor’ shall PERFORM Sufficient audit procedures on the body of work to DETERMINE its adequacy for purposes of the audit.

3. Determining Whether, in Which Areas, and to What Extent Internal Auditors Can be Used to Provide Direct Assistance

3.1 Determining Whether Internal Auditors Can be Used to Provide Direct Assistance for Purposes of the Audit

The ‘External Auditor’ shall EVALUATE the existence and significance of threats to objectivity and the level of competence of the internal auditors.

The ‘External Auditor’ shall NOT USE an internal auditor to provide direct assistance if:

  • There are significant threats to the objectivity of the internal auditor; OR
  • The internal auditor lacks sufficient competence to perform the proposed work.

3.2 Determining the Nature and Extent of Work that Can be Assigned to Internal Auditors Providing Direct Assistance

The ‘External Auditor‘ shall CONSIDER:

(a) The amount of Judgment involved in:
– Planning and performing relevant audit procedures; AND
– Evaluating the audit evidence gathered.
(b) The assessed risk of Material Misstatement; AND
(c) The external auditor’s evaluation of the existence and significance of threats to the objectivity and level of competence.

4. Using Internal Auditors to Provide Direct Assistance

Prior to using internal auditors to PROVIDE direct assistance for purposes of the audit, the ‘External Auditor’ shall:

  • OBTAIN Written Agreement from an authorized representative of the entity that internal auditors will be allowed to follow the external auditor’s instructions; AND
  • OBTAIN Written Agreement from the internal auditors that they will keep confidential specific matters as instructed.

Synopsis

ISA 610 ‘Using the Work of Internal Auditors‘ DEALS with the external auditor’s responsibilities if using the work of internal auditors.

[600-699] Using the Work of Others

ISA 600

ISA 620

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