Internal Auditors

Internal auditors may have an effect on the audit in 2 separate respects

The internal audit function may affect the nature, timing, & extent of audit procedures
necessary to form a basis for an opinion on the financial statements
The internal auditors may provide direct assistance in the performance of the audit
The impact of an internal audit function on the nature, timing, & extent of audit procedures will
depend on the competence & objectivity of the internal auditors
·1 Competence relates to their qualifications
Objectivity relates to the organizational level to which they report
Internal auditors may have an effect on
Procedures performed in obtaining an understanding of internal control
·2 Procedures performed in assessing the risk of material
misstatement
Substantive procedures performed

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Evidence - Module 3

Internal Auditors (continued)

Regardless of the use of internal auditors, certain judgments remain the responsibility of the
independent auditor
Assessments of inherent & control risks
·3 Materiality
·4 Sufficiency of tests performed
·5 Evaluation of significant estimates
Other matters affecting the auditor's report
The effect of the work of the independent auditor depends on the degree to which an item is
susceptible to risk of material misstatement
When the risk is relatively high, the work of the internal auditors will not eliminate the
independent auditor's need to test the assertions
When the risk is relatively low, the work of the internal auditors may be sufficient to re-
duce audit risk to an acceptable level avoiding the need for the independent auditor to
test the assertions directly

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Evidence - Module 3