9.2 Criteria of using internal audit work

When using the work of internal auditors, external auditors typically consider the following criteria to assess the reliability and relevance of the internal audit work:

1. Competence and Independence: External auditors evaluate the competence and independence of the internal audit function. This includes assessing the qualifications, experience, and skills of the internal auditors to ensure they possess the necessary expertise to perform their responsibilities effectively. Independence is also important to ensure the objectivity and unbiased nature of the internal audit work.
2. Quality of Internal Audit Policies and Procedures: External auditors review the internal audit function’s policies and procedures to determine if they are comprehensive, well-documented, and in line with relevant professional standards. These policies and procedures should provide guidance on planning, performing, and reporting internal audit work, ensuring consistency and quality.
3. Risk-Based Internal Audit Approach: External auditors assess whether the internal audit function adopts a risk-based approach in its work. This means that the internal auditors identify and prioritize risks, focus their efforts on areas of higher risk, and allocate resources accordingly. A risk-based approach enhances the effectiveness and efficiency of the internal audit work.
4. Adequacy of Internal Audit Planning: External auditors review the internal audit function’s annual audit plan to determine if it adequately covers significant areas of the organization’s operations and key risks. The plan should demonstrate a logical and systematic approach to addressing the organization’s internal control environment.
5. Workpaper Documentation: External auditors assess the completeness and adequacy of the internal audit workpaper documentation. This includes evaluating the extent of work performed, evidence obtained, and conclusions reached by the internal auditors. The workpaper documentation should be sufficiently detailed, organized, and supported to enable external auditors to understand the work performed.
6. Supervision and Review Process: External auditors evaluate the internal audit function’s supervision and review processes. This includes assessing whether appropriate levels of review are conducted by more experienced internal auditors or supervisors, ensuring the accuracy and completeness of the work performed.
7. Communication and Reporting: External auditors consider the quality and effectiveness of the internal audit function’s communication and reporting. This includes reviewing internal audit reports to assess if they provide clear and concise information, highlight significant findings and recommendations, and communicate the internal audit function’s overall conclusions effectively.