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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Using the work of others

Zephyr Co is a listed manufacturer. Its external auditor, Calder & Partners, is considering whether to use the work of Zephyr's internal audit function in the audit of inventory. Under ISA 610 (Revised 2013), which of the following must the external auditor first determine?

The external auditor must first determine whether the internal audit function's work is likely to be adequate for the purposes of the audit. This involves assessing objectivity, competence and a systematic, disciplined approach. No single factor such as reporting line, qualification or age of the function is decisive.

  1. AWhether the internal audit function reports directly to the audit committee and not to the finance director only
  2. BWhether the work of the internal audit function is likely to be adequate for the purposes of the auditCorrect
  3. CWhether the internal auditors hold a professional accountancy qualification
  4. DWhether the internal audit function has been in existence for at least three years

Explanation

ISA 610 requires the external auditor to determine whether the work of the internal audit function can be used by evaluating objectivity, competence and whether work is performed with a systematic and disciplined approach (including quality control). The overall question is whether the work is adequate for audit purposes. Reporting lines matter to objectivity, but are only one factor, not the overall determination. Qualification and years of existence are not mandated criteria.

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