Acca aa s21 Notes

3. Using the work of internal audit
The external auditor may decide to use the work of internal audit provided that internal audit:
๏
Is 
objective
and supported by organisational status (eg has direct access to TCWG); and
๏
Is 
competent
– not only in terms of professional qualifications and experience but whether it 
has adequate resources; and
๏
Applies a 
systematic and disciplined approach
to planning, performing and documenting its 
activities, including 
quality control
.
All three criteria must be met (ie a high level of objectivity cannot compensate for a lack of 
competence, or vice versa). If the auditor decides to use the work of internal audit, the auditor must 
evaluate whether the work of internal audit is adequate for audit purposes.
4. Using the work of experts
Using the work done by internal audit is one example of where auditors rely on the work of 3rd 
parties. Other examples include:
๏
Relying on experts such as estate agents, actuaries, lawyers.
๏
Relying on the work of other external auditors (e.g. if some companies in a group have different 
auditors). This is not examinable in AA.
There are two classes of expert (ie expertise in a field other than accounting or auditing):
๏
Management’s expert 
– assists management in preparing the financial statements. 
๏
Auditor’s expert 
– assists the auditor in obtaining sufficient appropriate audit evidence. May 
be internal or external to the audit firm.
If the work of management’s expert is to be used as audit evidence (ISA 500), the auditor must 
evaluate:
๏
The expert’s competence, capabilities and objectivity
๏
The appropriateness of their work to the relevant assertion(s)
๏
Whether it is sufficiently reliable for audit purposes (i.e. accurate and complete and sufficiently 
precise and detailed).
An auditor’s expert (ISA 620) may be needed:
๏
To evaluate the work of management’s expert
๏
If management does not have necessary expertise/a management expert.
This should be determined at the 
planning
stage of the audit. The auditor must evaluate the 
competence, capabilities and objectivity of the auditor’s expert (as for management’s expert).