Acca aaa s21 Notes

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Chapter 17
INTERNAL AUDIT
1. Introduction
The previous chapter introduced the work of others and experts in particular. This chapter considers 
ISA 610 
Using the Work of Internal Auditors
.
2. The internal audit function
Corporate governance (at least in the UK) does not insist that companies have an internal audit 
department, but they must keep the need for internal audit under review. More and more companies 
now have internal audit departments. These departments carry out work such as:
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Assessment of the design and operation of the system of internal control.
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Helping with inventory and cash counts.
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Verifying the physical existence of non-current assets.
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Assessing value for money of various activities.
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Carrying out special investigations, such as investigating a fraud.
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Assessing the security and operation of the IT system.
Internal auditors can be company employees but the function can also be outsourced. 
Obviously the internal auditors’ work can be of assistance to external auditors, particularly in their 
assessment of the system of internal control, attending inventory counts and verifying the existence 
and condition of assets. Internal auditors will often examine these matters in much more detail, and 
perhaps with more insight, than the external auditors.
However, it is important to note that ISA 610 states that internal audit can be involved in substantive 
procedures only in areas where only 
limited judgement
is required. All areas involving significant 
judgement or estimates must be handled by the external auditors.