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SAS
No. 25 Considering the Work of Internal Audit |
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 Status |
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Issued by Auditing Standards Committee in Taiwan on
5
October, 1993. |
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Summary |
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The responsibility to report on the financial statements rests
solely with the auditor. Unlike the situation in which the auditor
uses the work of other independent auditors, this responsibility
cannot be shared with the internal auditors. Because the auditor has
the ultimate responsibility to express an opinion on the financial
statements, judgments about assessments of inherent and control
risks, the materiality of misstatements, the sufficiency of tests
performed, the evaluation of significant accounting estimates, and
other matters affecting the auditor's report should always be those
of the auditor. |
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The auditor may find the results of the following procedures helpful
in assessing the relevancy of internal audit activities:
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Considering knowledge from prior-year audits
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Reviewing how the internal auditors allocate their audit
resources to financial or operating areas in response to their
risk-assessment process
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Reading internal audit reports to obtain detailed information
about the scope of internal audit activities |
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When assessing the internal auditors' competence, the auditor should
obtain or update information from prior years about such factors as—
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Educational level and professional experience of internal
auditors.
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Professional certification and continuing education.
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Audit policies, programs, and procedures.
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Practices regarding assignment of internal auditors.
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Supervision and review of internal auditors' activities.
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Quality of working-paper documentation, reports, and
recommendations.
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Evaluation of internal auditors' performance. |
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The internal auditors' work may affect the nature, timing, and
extent of the audit, including—
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Procedures the auditor performs when obtaining an understanding of
the entity's internal control.
Since a primary objective of many internal audit functions is to
review, assess, and monitor controls, the procedures performed by
the internal auditors in this area may provide useful information to
the auditor.
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Procedures the auditor performs when assessing risk.
The auditor assesses the risk of material misstatement at both the
financial-statement level and the account-balance or
class-of-transaction level. At the financial-statement level, the
auditor makes an overall assessment of the risk of material
misstatement. The entity's internal audit function may influence
overall assessment of risk as well as the auditor's resulting
decisions concerning the nature, timing, and extent of auditing
procedures to be performed. At the account-balance or
class-of-transaction level, the auditor performs procedures to
obtain and evaluate audit evidence concerning management's
assertions. The results of internal auditors' tests may provide
appropriate information about the effectiveness of controls and
change the nature, timing, and extent of testing the auditor would
otherwise need to perform.
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Substantive procedures the auditor performs.
Some procedures performed by the internal auditors may provide
direct evidence about material misstatements in assertions about
specific account balances or classes of transactions. The results of
these procedures can provide evidence the auditor may consider in
restricting detection risk for the related assertions. |
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In making judgments about the extent of the effect of the internal
auditors' work on the auditor's procedures, the auditor considers—
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The materiality of financial statement amounts—that is,
account balances or classes of transactions.
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The risk (consisting of inherent risk and control risk) of
material misstatement of the assertions related to these financial
statement amounts.
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The degree of subjectivity involved in the evaluation of the
audit evidence gathered in support of the assertions. |
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In performing the audit, the auditor may request direct assistance
from the internal auditors. This direct assistance relates to work
the auditor specifically requests the internal auditors to perform
to complete some aspect of the auditor's work. When direct
assistance is provided, the auditor should assess the internal
auditors' competence and objectivity and supervise, review,
evaluate, and test the work performed by internal auditors to the
extent appropriate in the circumstances. The auditor should inform
the internal auditors of their responsibilities, the objectives of
the procedures they are to perform, and matters that may affect the
nature, timing, and extent of audit procedures, such as possible
accounting and auditing issues. The auditor should also inform the
internal auditors that all significant accounting and auditing
issues identified during the audit should be brought to the
auditor's attention. |
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 Effective
date
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This Statement is effective for audit of financial statements with
fiscal years ending on or after 31 December, 1993. |
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