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SA 610 Internal Auditors

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SA 610(Revised)*
Using the Work of Internal Auditors
(Effective for audits of financial statements for periods
beginning on or after April 1, 2016)

Contents
Paragraph(s)
Introduction
Scope of this SA ................................................................................... 1-5
Relationship between SA 315 and SA 610 (Revised) ........................ 6-10
The External Auditor’s Responsibility for the Audit ............................... 11
Effective Date ......................................................................................... 12
Objectives ............................................................................................. 13
Definitions ............................................................................................. 14
Requirements
Determining Whether, in Which Areas, and to What Extent the
Work of the Internal Audit Function Can Be Used ........................... 15-20
Using the Work of the Internal Audit Function ................................. 21-25
Determining Whether, in Which Areas, and to What Extent
Internal Auditors Can Be Used to Provide Direct Assistance ........... 26-32
Using Internal Auditors to Provide Direct Assistance ...................... 33-35
Documentation .................................................................................. 36-37
Application and Other Explanatory Material
Definition of Internal Audit Function ................................................ A1-A4
Determining Whether, in Which Areas, and to What Extent the
Work of the Internal Audit Function Can Be Used ........................ A5-A23
Using the Work of the Internal Audit Function ............................ A24-A30
Determining Whether, in Which Areas, and to What Extent
Internal Auditors Can Be Used to Provide Direct Assistance ...... A31-A39
Using Internal Auditors to Provide Direct Assistance ................. A40-A41

* Issued in February 2016.
Standard on Auditing (SA) 610(Revised), “Using the Work of Internal
Auditors”, should be read in the context of the “Preface to the Standards
on Quality Control, Auditing, Review, Other Assurance and Related
Services,” which sets out the authority of SAs and SA 200, “Overall
Objectives of the Independent Auditor and the Conduct of an Audit in
Accordance with Standards on Auditing”.

SA 610(Revised) 2
Introduction
Scope of this SA
1. This Standard on Auditing (SA) deals with the external auditor’s
responsibilities if using the work of internal auditors. This includes (a) using the
work of the internal audit function in obtaining audit evidence and (b) using
internal auditors to provide direct assistance under the direction, supervision and
review of the external auditor.
2. This SA does not apply if the entity does not have an internal audit function.
(Ref: Para. A2)
3. If the entity has an internal audit function, the requirements in this SA
relating to using the work of that function do not apply if:
(a) The responsibilities and activities of the function are not relevant to the
audit; or
(b) Based on the auditor’s preliminary understanding of the function obtained
as a result of procedures performed under SA 315,1 the external auditor
does not expect to use the work of the function in obtaining audit evidence.
Nothing in this SA requires the external auditor to use the work of the internal
audit function to modify the nature or timing, or reduce the extent, of audit
procedures to be performed directly by the external auditor; it remains a decision
of the external auditor in establishing the overall audit strategy.

4. Furthermore, the requirements in this SA relating to direct assistance do not
apply if the external auditor does not plan to use internal auditors to provide
direct assistance.
5. In some cases, the external auditor may be prohibited, or restricted to some
extent, by law or regulation from using the work of the internal audit function or
using internal auditors to provide direct assistance. The SAs do not override laws
or regulations that govern an audit of financial statements.2 Such prohibitions or
restrictions will therefore not prevent the external auditor from complying with the
SAs. (Ref: Para. A31)

1 SA 315, Identifying and Assessing the Risks of Material Misstatement through Understanding the

Entity and Its Environment.
2 SA 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in

Accordance with Standards on Auditing, paragraph A56.

3 SA 610(Revised)
Relationship between SA 315 and SA 610 (Revised)
6. Many entities establish internal audit functions as part of their internal
control and governance structures. The objectives and scope of an internal audit
function, the nature of its responsibilities and its organizational status, including
the function’s authority and accountability, vary widely and depend on the size
and structure of the entity and the requirements of management and, where
applicable, those charged with governance.
7. SA 315 addresses how the knowledge and experience of the internal audit
function can inform the external auditor’s understanding of the entity and its
environment and identification and assessment of risks of material misstatement.
SA 3153 also explains how effective communication between the internal and
external auditors also creates an environment in which the external auditor can
be informed of significant matters that may affect the external auditor’s work.
8. Depending on whether the internal audit function’s organizational status
and relevant policies and procedures adequately support the objectivity of the
internal auditors, the level of competency of the internal audit function, and
whether the function applies a systematic and disciplined approach, the external
auditor may also be able to use the work of the internal audit function in a
constructive and complementary manner. This SA addresses the external
auditor’s responsibilities when, based on the external auditor’s preliminary
understanding of the internal audit function obtained as a result of procedures
performed under SA 315, the external auditor expects to use the work of the
internal audit function as part of the audit evidence obtained.4 Such use of that
work modifies the nature or timing, or reduces the extent, of audit procedures to
be performed directly by the external auditor.
9. In addition, this SA also addresses the external auditor’s responsibilities if
considering using internal auditors to provide direct assistance under the
direction, supervision and review of the external auditor.
10. There may be individuals in an entity that perform procedures similar to
those performed by an internal audit function. However, unless performed by an
objective and competent function that applies a systematic and disciplined
approach, including quality control, such procedures would be considered
internal controls and obtaining evidence regarding the effectiveness of such
controls would be part of the auditor’s responses to assessed risks in
accordance with SA 330.5

3 SA 315, Paragraph A115.
4 See paragraphs 15–25.
5 SA 330,The Auditor’s Responses to Assessed Risks.

SA 610(Revised) 4
The External Auditor’s Responsibility for the Audit
11. The external auditor has sole responsibility for the audit opinion expressed,
and that responsibility is not reduced by the external auditor’s use of the work of
the internal audit function or internal auditors to provide direct assistance on the
engagement. Although they may perform audit procedures similar to those
performed by the external auditor, neither the internal audit function nor the
internal auditors are independent of the entity as is required of the external
auditor in an audit of financial statements in accordance with SA 200.6 This SA,
therefore, defines the conditions that are necessary for the external auditor to be
able to use the work of internal auditors. It also defines the necessary work effort
to obtain sufficient appropriate evidence that the work of the internal audit
function, or internal auditors providing direct assistance, is adequate for the
purposes of the audit. The requirements are designed to provide a framework for
the external auditor’s judgments regarding the use of the work of internal auditors
to prevent over or undue use of such work.
Effective Date
12. This SA is effective for audits of financial statements for periods beginning
on or after 1st April, 2016.
Objectives
13. The objectives of the external auditor, where the entity has an internal audit
function and the external auditor expects to use the work of the function to
modify the nature or timing, or reduce the extent, of audit procedures to be
performed directly by the external auditor, or to use internal auditors to provide
direct assistance, are:
(a) To determine whether the work of the internal audit function or direct
assistance from internal auditors can be used, and if so, in which areas and
to what extent;
and having made that determination:
(b) If using the work of the internal audit function, to determine whether that
work is adequate for purposes of the audit; and
(c) If using internal auditors to provide direct assistance, to appropriately direct,
supervise and review their work.
Definitions
14. For purposes of the SAs, the following terms have the meanings attributed
below:

6 SA 200, paragraph 14.

5 SA 610(Revised)
(a) Internal audit function – A function of an entity that performs assurance and
consulting activities designed to evaluate and improve the effectiveness of
the entity’s governance, risk management and internal control processes.
(Ref: Para. A1–A4)
(b) Direct assistance – The use of internal auditors to perform audit procedures
under the direction, supervision and review of the external auditor.
Requirements
Determining Whether, in Which Areas, and to What Extent the Work
of the Internal Audit Function Can Be Used
Evaluating the Internal Audit Function
15. The external auditor shall determine whether the work of the internal audit
function can be used for purposes of the audit by evaluating the following:
(a) The extent to which the internal audit function’s organizational status and
relevant policies and procedures support the objectivity of the internal
auditors; (Ref: Para. A5–A9)
(b) The level of competence of the internal audit function; and (Ref: Para. A5–
A9)
(c) Whether the internal audit function applies a systematic and disciplined
approach, including quality control. (Ref: Para. A10–A11)
16. The external auditor shall not use the work of the internal audit function if
the external auditor determines that:
(a) The function’s organizational status and relevant policies and procedures
do not adequately support the objectivity of internal auditors;
(b) The function lacks sufficient competence; or
(c) The function does not apply a systematic and disciplined approach,
including quality control. (Ref: Para. A12–A14)
Determining the Nature and Extent of Work of the Internal Audit Function
that Can Be Used
17. As a basis for determining the areas and the extent to which the work of the
internal audit function can be used, the external auditor shall consider the nature
and scope of the work that has been performed, or is planned to be performed,
by the internal audit function and its relevance to the external auditor’s overall
audit strategy and audit plan. (Ref: Para. A15–A17)
18. The external auditor shall make all significant judgments in the audit

SA 610(Revised) 6
engagement and, to prevent undue use of the work of the internal audit function,
shall plan to use less of the work of the function and perform more of the work
directly: (Ref: Para. A15–A17)
(a) The more judgment is involved in:
(i) Planning and performing relevant audit procedures; and
(ii) Evaluating the audit evidence gathered; (Ref: Para. A18–A19)
(b) The higher the assessed risk of material misstatement at the assertion
level, with special consideration given to risks identified as significant; (Ref:
Para. A20–A22)
(c) The less the internal audit function’s organizational status and relevant
policies and procedures adequately support the objectivity of the internal
auditors; and
(d) The lower the level of competence of the internal audit function.
19. The external auditor shall also evaluate whether, in aggregate, using the
work of the internal audit function to the extent planned would still result in the
external auditor being sufficiently involved in the audit, given the external
auditor’s sole responsibility for the audit opinion expressed. (Ref: Para. A15–
A22)
20. The external auditor shall, in communicating with those charged with
governance an overview of the planned scope and timing of the audit in
accordance with SA 260(Revised),7 communicate how the external auditor has
planned to use the work of the internal audit function. (Ref: Para. A23)
Using the Work of the Internal Audit Function
21. If the external auditor plans to use the work of the internal audit function,
the external auditor shall discuss the planned use of its work with the function as
a basis for coordinating their respective activities. (Ref: Para. A24–A26)
22. The external auditor shall read the reports of the internal audit function
relating to the work of the function that the external auditor plans to use to obtain
an understanding of the nature and extent of audit procedures it performed and
the related findings.
23. The external auditor shall perform sufficient audit procedures on the body of
work of the internal audit function as a whole that the external auditor plans to
use to determine its adequacy for purposes of the audit, including evaluating

7 SA 260(Revised), Communication with Those Charged with Governance, paragraph 15.

7 SA 610(Revised)
whether:
(a) The work of the function had been properly planned, performed,
supervised, reviewed and documented;
(b) Sufficient appropriate evidence had been obtained to enable the function to
draw reasonable conclusions; and
(c) Conclusions reached are appropriate in the circumstances and the reports
prepared by the function are consistent with the results of the work
performed. (Ref: Para. A27–A30)
24. The nature and extent of the external auditor’s audit procedures shall be
responsive to the external auditor’s evaluation of:
(a) The amount of judgment involved;
(b) The assessed risk of material misstatement;
(c) The extent to which the internal audit function’s organizational status and
relevant policies and procedures support the objectivity of the internal
auditors; and
(d) The level of competence of the function;8 (Ref: Para. A27–A29)
and shall include reperformance of some of the work. (Ref: Para. A30)
25. The external auditor shall also evaluate whether the external auditor’s
conclusions regarding the internal audit function in paragraph 15 of this SA and
the determination of the nature and extent of use of the work of the function for
purposes of the audit in paragraphs 18–19 of this SA remain appropriate.
Determining Whether, in Which Areas, and to What Extent Internal
Auditors Can Be Used to Provide Direct Assistance
Determining Whether Internal Auditors Can Be Used to Provide Direct
Assistance for Purposes of the Audit
26. The external auditor may be prohibited by law or regulation from obtaining
direct assistance from internal auditors. If so, paragraphs 27–35 and 37 do not
apply. (Ref: Para. A31)
27. If using internal auditors to provide direct assistance is not prohibited by law
or regulation, and the external auditor plans to use internal auditors to provide
direct assistance on the audit, the external auditor shall evaluate the existence
and significance of threats to objectivity and the level of competence of the

8 See paragraph 18.

SA 610(Revised) 8
internal auditors who will be providing such assistance. The external auditor’s
evaluation of the existence and significance of threats to the internal auditors’
objectivity shall include inquiry of the internal auditors regarding interests and
relationships that may create a threat to their objectivity. (Ref: Para. A32–A34)
28. The external auditor shall not use an internal auditor to provide direct
assistance if:
(a) There are significant threats to the objectivity of the internal auditor; or
(b) The internal auditor lacks sufficient competence to perform the proposed
work. (Ref: Para. A32–A34)
Determining the Nature and Extent of Work that Can Be Assigned to
Internal Auditors Providing Direct Assistance
29. In determining the nature and extent of work that may be assigned to
internal auditors and the nature, timing and extent of direction, supervision and
review that is appropriate in the circumstances, the external auditor shall
consider:
(a) The amount of judgment involved in:
(i) Planning and performing relevant audit procedures; and
(ii) Evaluating the audit evidence gathered;
(b) The assessed risk of material misstatement; and
(c) The external auditor’s evaluation of the existence and significance of
threats to the objectivity and level of competence of the internal auditors
who will be providing such assistance. (Ref: Para. A35–A39)
30. The external auditor shall not use internal auditors to provide direct
assistance to perform procedures that:
(a) Involve making significant judgments in the audit; (Ref: Para. A19)
(b) Relate to higher assessed risks of material misstatement where the
judgment required in performing the relevant audit procedures or evaluating
the audit evidence gathered is more than limited; (Ref: Para. A38)
(c) Relate to work with which the internal auditors have been involved and
which has already been, or will be, reported to management or those
charged with governance by the internal audit function; or
(d) Relate to decisions the external auditor makes in accordance with this SA
regarding the internal audit function and the use of its work or direct
assistance. (Ref: Para. A35–A39)

9 SA 610(Revised)
31. Having appropriately evaluated whether and, if so, to what extent internal
auditors can be used to provide direct assistance on the audit, the external
auditor shall, in communicating with those charged with governance an overview
of the planned scope and timing of the audit in accordance with SA
260(Revised),9 communicate the nature and extent of the planned use of internal
auditors to provide direct assistance so as to reach a mutual understanding that
such use is not excessive in the circumstances of the engagement. (Ref: Para.
A39)
32. The external auditor shall evaluate whether, in aggregate, using internal
auditors to provide direct assistance to the extent planned, together with the
planned use of the work of the internal audit function, would still result in the
external auditor being sufficiently involved in the audit, given the external
auditor’s sole responsibility for the audit opinion expressed.
Using Internal Auditors to Provide Direct Assistance
33. Prior to using internal auditors to provide direct assistance for purposes of
the audit, the external auditor shall:
(a) Obtain written agreement from an authorized representative of the entity
that the internal auditors will be allowed to follow the external auditor’s
instructions, and that the entity will not intervene in the work the internal
auditor performs for the external auditor; and
(b) Obtain written agreement from the internal auditors that they will keep
confidential specific matters as instructed by the external auditor and inform
the external auditor of any threat to their objectivity.
34. The external auditor shall direct, supervise and review the work performed
by internal auditors on the engagement in accordance with SA 220.10 In so doing:
(a) The nature, timing and extent of direction, supervision, and review shall
recognize that the internal auditors are not independent of the entity and be
responsive to the outcome of the evaluation of the factors in paragraph 29
of this SA; and
(b) The review procedures shall include the external auditor checking back to
the underlying audit evidence for some of the work performed by the
internal auditors.
The direction, supervision and review by the external auditor of the work
performed by the internal auditors shall be sufficient in order for the external
auditor to be satisfied that the internal auditors have obtained sufficient

9 SA 260(Revised), paragraph 15.
10 SA 220, Quality Control for an Audit of Financial Statements.

SA 610(Revised) 10
appropriate audit evidence to support the conclusions based on that work. (Ref:
Para. A40–A41)
35. In directing, supervising and reviewing the work performed by internal
auditors, the external auditor shall remain alert for indications that the external
auditor’s evaluations in paragraph 27 are no longer appropriate.
Documentation
36. If the external auditor uses the work of the internal audit function, the
external auditor shall include in the audit documentation:
(a) The evaluation of:
(i) Whether the function’s organizational status and relevant policies and
procedures adequately support the objectivity of the internal auditors;
(ii) The level of competence of the function; and
(iii) Whether the function applies a systematic and disciplined approach,
including quality control;
(b) The nature and extent of the work used and the basis for that decision; and
(c) The audit procedures performed by the external auditor to evaluate the
adequacy of the work used.
37. If the external auditor uses internal auditors to provide direct assistance on
the audit, the external auditor shall include in the audit documentation:
(a) The evaluation of the existence and significance of threats to the objectivity
of the internal auditors, and the level of competence of the internal auditors
used to provide direct assistance;
(b) The basis for the decision regarding the nature and extent of the work
performed by the internal auditors;
(c) Who reviewed the work performed and the date and extent of that review in
accordance with SA 230;11
(d) The written agreements obtained from an authorized representative of the
entity and the internal auditors under paragraph 33 of this SA; and
(e) The working papers prepared by the internal auditors who provided direct
assistance on the audit engagement.
***

11 SA 230, Audit Documentation.

11 SA 610(Revised)
Application and Other Explanatory Material
Definition of Internal Audit Function (Ref: Para. 2, 14(a))
A1. The objectives and scope of internal audit functions typically include
assurance and consulting activities designed to evaluate and improve the
effectiveness of the entity’s governance processes, risk management and
internal control such as the following:
Activities Relating to Governance
 The internal audit function may assess the governance process in its
accomplishment of objectives on ethics and values, performance
management and accountability, communicating risk and control
information to appropriate areas of the organization and effectiveness of
communication among those charged with governance, external and
internal auditors, and management.
Activities Relating to Risk Management
 The internal audit function may assist the entity by identifying and
evaluating significant exposures to risk and contributing to the improvement
of risk management and internal control (including effectiveness of the
financial reporting process).
 The internal audit function may perform procedures to assist the entity in
the detection of fraud.
Activities Relating to Internal Control
 Evaluation of internal control. The internal audit function may be assigned
specific responsibility for reviewing controls, evaluating their operation and
recommending improvements thereto. In doing so, the internal audit
function provides assurance on the control. For example, the internal audit
function might plan and perform tests or other procedures to provide
assurance to management and those charged with governance regarding
the design, implementation and operating effectiveness of internal control,
including those controls that are relevant to the audit.
 Examination of financial and operating information. The internal audit
function may be assigned to review the means used to identify, recognize,
measure, classify and report financial and operating information, and to
make specific inquiry into individual items, including detailed testing of
transactions, balances and procedures.
 Review of operating activities. The internal audit function may be assigned
to review the economy, efficiency and effectiveness of operating activities,
including non-financial activities of an entity.

SA 610(Revised) 12
 Review of compliance with laws and regulations. The internal audit function
may be assigned to review compliance with laws, regulations and other
external requirements, and with management policies and directives and
other internal requirements.
A2. Activities similar to those performed by an internal audit function may be
conducted by functions with other titles within an entity. Some or all of the
activities of an internal audit function may also be outsourced to a third-party
service provider. Neither the title of the function, nor whether it is performed by
the entity or a third-party service provider, are sole determinants of whether or
not the external auditor can use the work of the function. Rather, it is the nature
of the activities; the extent to which the internal audit function’s organizational
status and relevant policies and procedures support the objectivity of the internal
auditors; competence; and systematic and disciplined approach of the function
that are relevant. References in this SA to the work of the internal audit function
include relevant activities of other functions or third-party providers that have
these characteristics.
A3. In addition, those in the entity with operational and managerial duties and
responsibilities outside of the internal audit function would ordinarily face threats
to their objectivity that would preclude them from being treated as part of an
internal audit function for the purpose of this SA, although they may perform
control activities that can be tested in accordance with SA 330.12 For this reason,
monitoring controls performed by an owner-manager would not be considered
equivalent to an internal audit function.
A4. While the objectives of an entity’s internal audit function and the external
auditor differ, the function may perform audit procedures similar to those
performed by the external auditor in an audit of financial statements. If so, the
external auditor may make use of the function for purposes of the audit in one or
more of the following ways:
 To obtain information that is relevant to the external auditor’s assessments
of the risks of material misstatement due to error or fraud. In this regard, SA
31513 requires the external auditor to obtain an understanding of the nature
of the internal audit function’s responsibilities, its status within the
organization, and the activities performed, or to be performed, and make
inquiries of appropriate individuals within the internal audit function (if the
entity has such a function); or
 Unless prohibited, or restricted to some extent, by law or regulation, the
external auditor, after appropriate evaluation, may decide to use work that

12 See paragraph 10.
13 SA 315, paragraph 6(a).

13 SA 610(Revised)
has been performed by the internal audit function during the period in
partial substitution for audit evidence to be obtained directly by the external
auditor.14
In addition, unless prohibited, or restricted to some extent, by law or regulation,
the external auditor may use internal auditors to perform audit procedures under
the direction, supervision and review of the external auditor (referred to as “direct
assistance” in this SA).15
Determining Whether, in Which Areas, and to What Extent the Work
of the Internal Audit Function Can Be Used
Evaluating the Internal Audit Function
Objectivity and Competence (Ref: Para. 15(a)–(b))
A5. The external auditor exercises professional judgment in determining
whether the work of the internal audit function can be used for purposes of the
audit, and the nature and extent to which the work of the internal audit function
can be used in the circumstances.
A6. The extent to which the internal audit function’s organizational status and
relevant policies and procedures support the objectivity of the internal auditors
and the level of competence of the function are particularly important in
determining whether to use and, if so, the nature and extent of the use of the
work of the function that is appropriate in the circumstances.
A7. Objectivity refers to the ability to perform those tasks without allowing bias,
conflict of interest or undue influence of others to override professional
judgments. Factors that may affect the external auditor’s evaluation include the
following:
 Whether the organizational status of the internal audit function, including
the function’s authority and accountability, supports the ability of the
function to be free from bias, conflict of interest or undue influence of others
to override professional judgments. For example, whether the internal audit
function reports to those charged with governance or an officer with
appropriate authority, or if the function reports to management, whether it
has direct access to those charged with governance.
 Whether the internal audit function is free of any conflicting responsibilities,
for example, having managerial or operational duties or responsibilities that
are outside of the internal audit function.

14 See paragraphs 15–25.
15 See paragraphs 26–35.

SA 610(Revised) 14
 Whether those charged with governance oversee employment decisions
related to the internal audit function, for example, determining the
appropriate remuneration policy.
 Whether there are any constraints or restrictions placed on the internal
audit function by management or those charged with governance, for
example, in communicating the internal audit function’s findings to the
external auditor.
 Whether the internal auditors are members of relevant professional bodies
and their memberships obligate their compliance with relevant professional
standards relating to objectivity, or whether their internal policies achieve
the same objectives.
A8. Competence of the internal audit function refers to the attainment and
maintenance of knowledge and skills of the function as a whole at the level
required to enable assigned tasks to be performed diligently and in accordance
with applicable professional standards. Factors that may affect the external
auditor’s determination include the following:
 Whether the internal audit function is adequately and appropriately
resourced relative to the size of the entity and the nature of its operations.
 Whether there are established policies for hiring, training and assigning
internal auditors to internal audit engagements.
 Whether the internal auditors have adequate technical training and
proficiency in auditing. Relevant criteria that may be considered by the
external auditor in making the assessment may include, for example, the
internal auditors’ possession of a relevant professional designation and
experience.
 Whether the internal auditors possess the required knowledge relating to
the entity’s financial reporting and the applicable financial reporting
framework and whether the internal audit function possesses the necessary
skills (for example, industry-specific knowledge) to perform work related to
the entity’s financial statements.
 Whether the internal auditors are members of relevant professional bodies
that oblige them to comply with the relevant professional standards
including continuing professional development requirements.
A9. Objectivity and competence may be viewed as a continuum. The more the
internal audit function’s organizational status and relevant policies and
procedures adequately support the objectivity of the internal auditors and the
higher the level of competence of the function, the more likely the external

15 SA 610(Revised)
auditor may make use of the work of the function and in more areas. However,
an organizational status and relevant policies and procedures that provide strong
support for the objectivity of the internal auditors cannot compensate for the lack
of sufficient competence of the internal audit function. Equally, a high level of
competence of the internal audit function cannot compensate for an
organizational status and policies and procedures that do not adequately support
the objectivity of the internal auditors.
Application of a Systematic and Disciplined Approach (Ref: Para. 15(c))
A10. The application of a systematic and disciplined approach to planning,
performing, supervising, reviewing and documenting its activities distinguishes
the activities of the internal audit function from other monitoring control activities
that may be performed within the entity.
A11. Factors that may affect the external auditor’s determination of whether the
internal audit function applies a systematic and disciplined approach include the
following:
 The existence, adequacy and use of documented internal audit procedures
or guidance covering such areas as risk assessments, work programs,
documentation and reporting, the nature and extent of which is
commensurate with the size and circumstances of an entity.
 Whether the internal audit function has appropriate quality control policies
and procedures, for example, such as those policies and procedures in
SQC 116 that would be applicable to an internal audit function (such as
those relating to leadership, human resources and engagement
performance) or quality control requirements in standards set by the
relevant professional bodies for internal auditors. Such bodies may also
establish other appropriate requirements such as conducting periodic
external quality assessments.
Circumstances When Work of the Internal Audit Function Cannot Be Used (Ref:
Para. 16)
A12. The external auditor’s evaluation of whether the internal audit function’s
organizational status and relevant policies and procedures adequately support
the objectivity of the internal auditors, the level of competence of the internal
audit function, and whether it applies a systematic and disciplined approach may
indicate that the risks to the quality of the work of the function are too significant
and therefore it is not appropriate to use any of the work of the function as audit
evidence.

16 Standard
on Quality Control (SQC) 1, Quality Control for Firms that Perform Audits and
Reviews of Historical Financial Information, and Other Assurance and Related Services
Engagements.

SA 610(Revised) 16
A13. Consideration of the factors in paragraphs A7, A8 and A11 of this SA
individually and in aggregate is important because an individual factor is often
not sufficient to conclude that the work of the internal audit function cannot be
used for purposes of the audit. For example, the internal audit function’s
organizational status is particularly important in evaluating threats to the
objectivity of the internal auditors. If the internal audit function reports to
management, this would be considered a significant threat to the function’s
objectivity unless other factors such as those described in paragraph A7 of this
SA collectively provide sufficient safeguards to reduce the threat to an
acceptable level.
A14. In addition, a self-review threat17 is created when the external auditor
accepts an engagement to provide internal audit services to an audit client, and
the results of those services will be used in conducting the audit. This is because
of the possibility that the engagement team will use the results of the internal
audit service without properly evaluating those results or without exercising the
same level of professional skepticism as would be exercised when the internal
audit work is performed by individuals who are not members of the firm.
Paragraph 290.173 of the Code of Ethics, issued by the Institute of Chartered
Accountants of India therefore in the context of provision of internal audit service
to financial statement audit clients, specifically provides that “a statutory auditor
of an entity cannot be its internal auditor as it will not be possible for him to give
an independent and objective opinion”. The said Code of Ethics discusses the
threats and the safeguards that can be applied to reduce the threats to an
acceptable level in other circumstances.
Determining the Nature and Extent of Work of the Internal Audit Function
that Can Be Used
Factors Affecting the Determination of the Nature and Extent of the Work of the
Internal Audit Function that Can Be Used (Ref: Para. 17–19)
A15. Once the external auditor has determined that the work of the internal audit
function can be used for purposes of the audit, a first consideration is whether
the planned nature and scope of the work of the internal audit function that has
been performed, or is planned to be performed, is relevant to the overall audit
strategy and audit plan that the external auditor has established in accordance
with SA 300.18
A16. Examples of work of the internal audit function that can be used by the
external auditor include the following:

17 Attention of the members is also invited to paragraph 2.1 of the Guidance Note on Independence

of Auditors, issued by the Institute of Chartered Accountants of India.
18 SA 300, Planning an Audit of Financial Statements.

17 SA 610(Revised)
 Testing of the operating effectiveness of controls.
 Substantive procedures involving limited judgment.
 Observations of inventory counts.
 Tracing transactions through the information system relevant to financial
reporting.
 Testing of compliance with regulatory requirements.
 In some circumstances, audits or reviews of the financial information of
subsidiaries that are not significant components to the group (where this
does not conflict with the requirements of SA 600).19
A17. The external auditor’s determination of the planned nature and extent of
use of the work of the internal audit function will be influenced by the external
auditor’s evaluation of the extent to which the internal audit function’s
organizational status and relevant policies and procedures adequately support
the objectivity of the internal auditors and the level of competence of the internal
audit function in paragraph 18 of this SA. In addition, the amount of judgment
needed in planning, performing and evaluating such work and the assessed risk
of material misstatement at the assertion level are inputs to the external auditor’s
determination. Further, there are circumstances in which the external auditor
cannot use the work of the internal audit function for purpose of the audit as
described in paragraph 16 of this SA.
Judgments in planning and performing audit procedures and evaluating results
(Ref: Para. 18(a), 30(a))
A18. The greater the judgment needed to be exercised in planning and
performing the audit procedures and evaluating the audit evidence, the external
auditor will need to perform more procedures directly in accordance with
paragraph 18 of this SA, because using the work of the internal audit function
alone will not provide the external auditor with sufficient appropriate audit
evidence.
A19. Since the external auditor has sole responsibility for the audit opinion
expressed, the external auditor needs to make the significant judgments in the
audit engagement in accordance with paragraph 18. Significant judgments
include the following:
 Assessing the risks of material misstatement;
 Evaluating the sufficiency of tests performed;
 Evaluating the appropriateness of management’s use of the going concern
assumption;

19 SA 600, Using the Work of Another Auditor.

SA 610(Revised) 18
 Evaluating significant accounting estimates; and
 Evaluating the adequacy of disclosures in the financial statements, and
other matters affecting the auditor’s report.
Assessed risk of material misstatement (Ref: Para. 18(b))
A20. For a particular account balance, class of transaction or disclosure, the
higher an assessed risk of material misstatement at the assertion level, the more
judgment is often involved in planning and performing the audit procedures and
evaluating the results thereof. In such circumstances, the external auditor will
need to perform more procedures directly in accordance with paragraph 18 of
this SA, and accordingly, make less use of the work of the internal audit function
in obtaining sufficient appropriate audit evidence. Furthermore, as explained in
SA 200,20 the higher the assessed risks of material misstatement, the more
persuasive the audit evidence required by the external auditor will need to be,
and, therefore, the external auditor will need to perform more of the work directly.
A21. As explained in SA 315,21 significant risks require special audit
consideration and therefore the external auditor’s ability to use the work of the
internal audit function in relation to significant risks will be restricted to
procedures that involve limited judgment. In addition, where the risks of material
misstatement is other than low, the use of the work of the internal audit function
alone is unlikely to reduce audit risk to an acceptably low level and eliminate the
need for the external auditor to perform some tests directly.
A22. Carrying out procedures in accordance with this SA may cause the external
auditor to reevaluate the external auditor’s assessment of the risks of material
misstatement. Consequently, this may affect the external auditor’s determination
of whether to use the work of the internal audit function and whether further
application of this SA is necessary.
Communication with Those Charged with Governance (Ref: Para. 20)
A23. In accordance with SA 260(Revised),22 the external auditor is required to
communicate with those charged with governance an overview of the planned
scope and timing of the audit. The planned use of the work of the internal audit
function is an integral part of the external auditor’s overall audit strategy and is
therefore relevant to those charged with governance for their understanding of
the proposed audit approach.

20 SA 200, paragraph A29.
21 SA 315, paragraph 4(e).
22 SA 260(Revised), paragraph 15.

19 SA 610(Revised)
Using the Work of the Internal Audit Function
Discussion and Coordination with the Internal Audit Function (Ref: Para.
21)
A24. In discussing the planned use of their work with the internal audit function
as a basis for coordinating the respective activities, it may be useful to address
the following:
 The timing of such work.
 The nature of the work performed.
 The extent of audit coverage.
 Materiality for the financial statements as a whole (and, if applicable,
materiality level or levels for particular classes of transactions, account
balances or disclosures), and performance materiality.
 Proposed methods of item selection and sample sizes.
 Documentation of the work performed.
 Review and reporting procedures.
A25. Coordination between the external auditor and the internal audit function is
effective when, for example:
 Discussions take place at appropriate intervals throughout the period.
 The external auditor informs the internal audit function of significant matters
that may affect the function.
 The external auditor is advised of and has access to relevant reports of the
internal audit function and is informed of any significant matters that come
to the attention of the function when such matters may affect the work of
the external auditor so that the external auditor is able to consider the
implications of such matters for the audit engagement.
A26. SA 20023 discusses the importance of the auditor planning and performing
the audit with professional skepticism, including being alert to information that
brings into question the reliability of documents and responses to inquiries to be
used as audit evidence. Accordingly, communication with the internal audit
function throughout the engagement may provide opportunities for internal
auditors to bring matters that may affect the work of the external auditor to the
external auditor’s attention.24 The external auditor is then able to take such
information into account in the external auditor’s identification and assessment of
risks of material misstatement. In addition, if such information may be indicative

23 SA 200, paragraphs 15 and A18.
24 SA 315, paragraph A115.

SA 610(Revised) 20
of a heightened risk of a material misstatement of the financial statements or
may be regarding any actual, suspected or alleged fraud, the external auditor
can take this into account in the external auditor’s identification of risk of material
misstatement due to fraud in accordance with SA 240.25
Procedures to Determine the Adequacy of Work of the Internal Audit
Function (Ref: Para. 23–24)
A27. The external auditor’s audit procedures on the body of work of the internal
audit function as a whole that the external auditor plans to use provide a basis for
evaluating the overall quality of the function’s work and the objectivity with which
it has been performed.
A28. The procedures the external auditor may perform to evaluate the quality of
the work performed and the conclusions reached by the internal audit function, in
addition to reperformance in accordance with paragraph 24, include the
following:
 Making inquiries of appropriate individuals within the internal audit function.
 Observing procedures performed by the internal audit function.
 Reviewing the internal audit function’s work program and working papers.
A29. The more judgment involved, the higher the assessed risk of material
misstatement, the less the internal audit function’s organizational status and
relevant policies and procedures adequately support the objectivity of the internal
auditors, or the lower the level of competence of the internal audit function, the
more audit procedures are needed to be performed by the external auditor on the
overall body of work of the function to support the decision to use the work of the
function in obtaining sufficient appropriate audit evidence on which to base the
audit opinion.
Reperformance (Ref: Para. 24)
A30. For purposes of this SA, reperformance involves the external auditor’s
independent execution of procedures to validate the conclusions reached by the
internal audit function. This objective may be accomplished by examining items
already examined by the internal audit function or, where it is not possible to do
so, the same objective may also be accomplished by examining sufficient other
similar items not actually examined by the internal audit function. Reperformance
provides more persuasive evidence regarding the adequacy of the work of the
internal audit function compared to other procedures the external auditor may
perform in paragraph A28. While it is not necessary for the external auditor to do

25 SA 315, paragraph A10 in relation to SA 240, The Auditor’s Responsibilities Relating to Fraud in

an Audit of Financial Statements.

21 SA 610(Revised)
reperformance in each area of work of the internal audit function that is being
used, some reperformance is required on the body of work of the internal audit
function as a whole that the external auditor plans to use in accordance with
paragraph 24. The external auditor is more likely to focus reperformance in those
areas where more judgment was exercised by the internal audit function in
planning, performing and evaluating the results of the audit procedures and in
areas of higher risk of material misstatement.
Determining Whether, in Which Areas and to What Extent Internal
Auditors Can Be Used to Provide Direct Assistance
Determining Whether Internal Auditors Can Be Used to Provide Direct
Assistance for Purposes of the Audit (Ref: Para. 5, 26–28)
A31. In case where the external auditor is prohibited by law or regulation from
using internal auditors to provide direct assistance, it is relevant for the principal
auditors to consider whether the prohibition also extends to component auditors
and, if so, to address this in the communication to the component auditors.
A32. As stated in paragraph A7 of this SA, objectivity refers to the ability to
perform the proposed work without allowing bias, conflict of interest or undue
influence of others to override professional judgments. In evaluating the
existence and significance of threats to the objectivity of an internal auditor, the
following factors may be relevant:
 The extent to which the internal audit function’s organizational status and
relevant policies and procedures support the objectivity of the internal
auditors.26
 Family and personal relationships with an individual working in, or
responsible for, the aspect of the entity to which the work relates.
 Association with the division or department in the entity to which the work
relates.
 Significant financial interests in the entity other than remuneration on terms
consistent with those applicable to other employees at a similar level of
seniority.
Material issued by relevant professional bodies for internal auditors may provide
additional useful guidance.
A33. There may also be some circumstances in which the significance of the
threats to the objectivity of an internal auditor is such that there are no

26 See paragraph A7.

SA 610(Revised) 22
safeguards that could reduce them to an acceptable level. For example, because
the adequacy of safeguards is influenced by the significance of the work in the
context of the audit, paragraph 30(a) and (b) prohibits the use of internal auditors
to provide direct assistance in relation to performing procedures that involve
making significant judgments in the audit or that relate to higher assessed risks
of material misstatement where the judgment required in performing the relevant
audit procedures or evaluating the audit evidence gathered is more than limited.
This would also be the case where the work involved creates a self-review threat,
which is why internal auditors are prohibited from performing procedures in the
circumstances described in paragraph 30(c) and (d).
A34. In evaluating the level of competence of an internal auditor, many of the
factors in paragraph A8 of this SA may also be relevant, applied in the context of
individual internal auditors and the work to which they may be assigned.
Determining the Nature and Extent of Work that Can Be Assigned to
Internal Auditors Providing Direct Assistance (Ref: Para. 29–31)
A35. Paragraphs A15–A22 of this SA provide relevant guidance in determining
the nature and extent of work that may be assigned to internal auditors.
A36. In determining the nature of work that may be assigned to internal auditors,
the external auditor is careful to limit such work to those areas that would be
appropriate to be assigned. Examples of activities and tasks that would not be
appropriate to use internal auditors to provide direct assistance include the
following:
 Discussion of fraud risks. However, the external auditors may make
inquiries of internal auditors about fraud risks in the organization in
accordance with SA 315.27
 Determination of unannounced audit procedures as addressed in SA 240.
A37. Similarly, since in accordance with SA 50528 the external auditor is required
to maintain control over external confirmation requests and evaluate the results
of external confirmation procedures, it would not be appropriate to assign these
responsibilities to internal auditors. However, internal auditors may assist in
assembling information necessary for the external auditor to resolve exceptions
in confirmation responses.
A38. The amount of judgment involved and the risk of material misstatement are
also relevant in determining the work that may be assigned to internal auditors
providing direct assistance. For example, in circumstances where the valuation

27 SA 315, paragraph 6(a).
28 SA 505, External Confirmations, paragraphs 7 and 16.

23 SA 610(Revised)
of accounts receivable is assessed as an area of higher risk, the external auditor
could assign the checking of the accuracy of the aging to an internal auditor
providing direct assistance. However, because the evaluation of the adequacy of
the provision based on the aging would involve more than limited judgment, it
would not be appropriate to assign that latter procedure to an internal auditor
providing direct assistance.
A39. Notwithstanding the direction, supervision and review by the external
auditor, excessive use of internal auditors to provide direct assistance may affect
perceptions regarding the independence of the external audit engagement.
Using Internal Auditors to Provide Direct Assistance (Ref: Para. 34)
A40. As individuals in the internal audit function are not independent of the entity
as is required of the external auditor when expressing an opinion on financial
statements, the external auditor’s direction, supervision and review of the work
performed by internal auditors providing direct assistance will generally be of a
different nature and more extensive than if members of the engagement team
perform the work.
A41. In directing the internal auditors, the external auditor may, for example,
remind the internal auditors to bring accounting and auditing issues identified
during the audit to the attention of the external auditor. In reviewing the work
performed by the internal auditors, the external auditor’s considerations include
whether the evidence obtained is sufficient and appropriate in the circumstances,
and that it supports the conclusions reached.

SA 610(Revised) 24