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IAASB issues revised guidance on using internal auditors

  • IAASB (International Auditing and Assurance Standards Board) (lt gray) Image

20 Mar 2013

The International Auditing and Assurance Standards Board (IAASB) has issued new requirements and guidance that address the auditor’s responsibilities if using internal auditors to provide 'direct assistance' under the direction, supervision, and review of the external auditor for purposes of the audit.

The new requirements are contained in a revised version of International Standard on Auditing ISA 610 Using the Work of Internal Auditors, and follows an earlier revision to the standard in March 2012.

At the time of issuing the revised ISA 610 in 2012, the IAASB decided to only include provisions addressing the external auditor’s use of the work of the internal audit function, so as to allow the International Ethics Standards Board for Accountants (IESBA) to expose complimentary amendments to the Code of Ethics for Professional Accountants to deal with the nature of the audit "engagement team".

With the release of the revised ISA, the standard now contains information about:

  • When an auditor may use internal auditors to provide direct assistance (if not prohibited by relevant laws), prohibiting such involvement where there are significant threats to the objectivity of the internal auditor, or where the internal auditor lacks sufficient competence to perform the proposed work
  • Guidance on the nature and extent of work that can be assigned to internal auditors, prohibiting involvement in such areas as significant audit judgements, higher risk areas or areas where the internal auditor has been involved
  • Process steps involved in using an internal auditor, including written agreement from authorised representations that internal auditors can follow the directions of the external auditor, confidentiality requirements, and the direction, supervision and review of the internal auditor's work
  • Audit documentation requirements.

Consistent with the discussion above, the new requirements make it clear that an audit “engagement team” excludes individuals within the client’s internal audit function who provide direct assistance on an audit engagement when the external auditor complies with the requirements of ISA 610 and the Code of Ethics for Professional Accountants has also been similarly amended. A number of consequential amendments are also made to various other pronouncements to take the new requirements into account.

The revisions to ISA 610 are effective for audits of financial statements for periods ending on or after 15 December 2014.

Click for IAASB press release (link to IFAC website).

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