PSA

 610  -­‐  USING  THE  WORK  OF          

                                   INTERNAL  AUDITORS  
                                   &  RELATED  CONFORMING          
                                     AMENDMENTS  

PSA  620  -­‐  USING  THE  WORK  

                               OF  AN  AUDITOR’S  EXPERT  
 Auditing and Assurance Standards Council

Philippine Standard on Auditing 620 (Revised and Redrafted)

USING THE WORK OF AN AUDITOR’S EXPERT

Philippine Standard on Auditing 520 (Redrafted)

ANALYTICAL PROCEDURES
Conforming Amendments

PSA 315 (Redrafted), Identifying and Assessing the Risks

of Material Misstatement Through Understanding the
Entity and Its Environment
 USING THE WORK OF AN AUDITOR’S EXPERT
(Effective for audits of financial statements for periods beginning on or after December 15, 2009)

CONTENTS
Philippine Standard on Auditing 620 (Revised and Redrafted)
Paragraph
Introduction
USING THE WORK OF AN AUDITOR’S EXPERT
Scope of this PSA....................................................................................................... 1-2
The Auditor’s Responsibility for the Audit Opinion.................................................. 3
Effective Date............................................................................................................. 4
Objectives................................................................................................................. 5
Definitions................................................................................................................. 6
Requirements
Determining the Need for an Auditor’s Expert......................................................... 7
Nature, Timing and Extent of Audit Procedures....................................................... 8
The Competence, Capabilities and Objectivity of the Auditor’s Expert................... 9
Obtaining an Understanding of the Field of Expertise of the Auditor’s Expert....... 10
Agreement with the Auditor’s Expert....................................................................... 11
Evaluating the Adequacy of the Auditor’s Expert’s Work....................................... 12-13
Reference to the Auditor’s Expert in the Auditor’s Report ..................................... 14-15
Application and Other Explanatory Material
Definitions................................................................................................................ A1-A3
Determining the Need for an Auditor’s Expert....................................................... A4-A9
Nature, Timing and Extent of Audit Procedures..................................................... A10-A13
Introduction
Scope of this PSA
Scope  of  PSA  620:  Using  the  work  of  an  auditor’s  expert      
1. This Philippine Standard on Auditing (PSA) deals with the auditor’s responsibilities
regarding the use of an individual or organization’s work in a field of expertise other
than accounting or auditing, when that work is used to assist the auditor in obtaining
sufficient appropriate audit evidence.
The  auditor’s  educa/on  and  experience  enable  the  auditor  to  be  
2. This PSA does not deal with:
knowledgeable  about  business  ma9ers  in  general.  However,  the  auditor  
is  not  expected  to  have  the  experNse  required  to  pracNce  other  
(a) Situations
profession   where the engagement team includes a member with expertise in a
or  occupaNon.  
specialized area of accounting or auditing, which is dealt with in PSA 220
Not  all  engagements  
(Redrafted);1 orwould  require  the  help  of  an  expert.    The  auditor  
will  be  able  to  obtain  sufficient  appropriate  evidence  about  an  account  
balance  or  transac/on  class  even  without  the  help  of  an  expert.  
(b) The auditor’s use of the work of an individual or organization possessing
expertise in a field other than accounting or auditing, whose work in that field
is used by the entity to assist the entity in preparing the financial statements (a
management’s expert), which is dealt with in PSA 500 (Redrafted).2
 than accounting or auditing, when that work is used to assist the auditor in obtaining
sufficient appropriate audit evidence.

2. This PSA does not deal with:

PSA  620  Sec.  2:  Using  the  work  of  an  auditor’s  expert  does  not  deal  with:      
(a) Situations where the engagement team includes a member with expertise in a
specialized area of accounting or auditing, which is dealt with in PSA 220
(Redrafted);1 or

(b) The auditor’s use of the work of an individual or organization possessing

expertise in a field other than accounting or auditing, whose work in that field
is used by the entity to assist the entity in preparing the financial statements (a
management’s expert), which is dealt with in PSA 500 (Redrafted).2
PSA  220  Quality  Control  for  Audits  of  Historical  F/S  
The Auditor’s Responsibility for the Audit Opinion
PSA  500  Audit  Evidence  
3. The auditor has sole responsibility for the audit opinion expressed, and that
responsibility is not reduced by the auditor’s use of the work of an auditor’s expert.
Nonetheless, if the auditor using the work of an auditor’s expert, having followed this
PSA, concludes that the work of that expert is adequate for the auditor’s purposes, the
 expertise in a field other than accounting or auditing, whose work in that field
is used by the entity to assist the entity in preparing the financial statements (a
management’s expert), which is dealt with in PSA 500 (Redrafted).2

The Auditor’s Responsibility for the Audit Opinion

3. The auditor has sole responsibility for the audit opinion expressed, and that
responsibility is not reduced by the auditor’s use of the work of an auditor’s expert.
Nonetheless, if the auditor using the work of an auditor’s expert, having followed this
PSA, concludes that the work of that expert is adequate for the auditor’s purposes, the
auditor may accept that expert’s findings or conclusions in the expert’s field as
appropriate audit evidence.

Effective Date

4. This PSA is effective for audits of financial statements for periods beginning on or
after December 15, 2009.

Objectives
5. The objectives of the auditor are:
4. This PSA is effective for audits of financial statements for periods beginning on or
after December 15, 2009.

Objectives
5. The objectives of the auditor are:

(a) To determine whether to use the work of an auditor’s expert; and

(b) If using the work of an auditor’s expert, to determine whether that work is
adequate for the auditor’s purposes.

1
PSA 220 (Redrafted), “Quality Control for an Audit of Financial Statements,” paragraph A20.
2
PSA 500 (Redrafted), “Audit Evidence,” paragraphs A34-A48.
 PSA 620 (Revised and Redrafted)

Definitions
Definitions
Definitions
6. For purposes of the PSAs, the following terms have the meanings attributed below:
6.
6. For purposes
For purposesofofthe
thePSAs,
PSAs,thethefollowing
followingterms
termshave
havethethemeanings
meaningsattributed
attributed below:
below:
(a) Auditor’s
(a) Auditor’s expert
expert– An
– Anindividual
individualorororganization possessingexpertise
organization possessing expertisein ina a
(a) fieldfield
Auditor’s
other
otherthanexpert
than
– An individual
accounting or organization
accountingororauditing,
auditing, whose workpossessing
whose work ininthat
thatfield expertise
field usedbyinby
isisused
a
thethe
fieldtoother
auditor
auditor assist than
to assist accounting
thethe auditorininor
auditor auditing,sufficient
obtaining
obtaining whose work
sufficient in that field
appropriate
appropriate audit
audit isevidence.
used by the
evidence.
An An auditor
auditor’s 3
to
auditor’s assist
expert
expert the
mayauditor
maybe in
beeither obtaining
either anauditor’s
an sufficient
auditor’s appropriate
internal
internal expert
expert (who audit
(who aevidence.
is is a
partner
3 or staff, including temporary staff, of the auditor’s firm or a network
firm),auditor’s
An
partner ororstaff, expert may
including
an auditor’s be either
expert.anstaff,
temporary
external auditor’s
(Ref: of the
Para. internal
auditor’s
A1-A3) expert
firm(whoor a isnetwork
a
firm), or an3 or
partner auditor’s externaltemporary
staff, including expert. (Ref:staff, of A1-A3)
Para. the auditor’s firm or a network
(b) Expertise – Skills, knowledge and experience in a particular field.
firm), or an auditor’s external expert. (Ref: Para. A1-A3)
(b) (c) Expertise – Skills, knowledge and experience in a particular field.
Management’s expert – An individual or organization possessing expertise in
a field other than accounting or auditing, whose work in that field is used by
(b) Expertise – assist
Skills,theknowledge and experience in a particular field.
(c) Management’s expert – An individual or organization possessing expertise in
the entity to entity in preparing the financial statements.
a field other than accounting or auditing, whose work in that field is used by
(c) the entity
Requirements Management’s expert
to assist the – Aninindividual
entity preparingortheorganization possessing expertise in
financial statements.
a field other than accounting or auditing, whose work in that field is used by
Determining the Need for an Auditor’s Expert
Requirements the entity to assist the entity in preparing the financial statements.
7. If expertise in a field other than accounting or auditing is necessary to obtain
 (b) An Expertise
auditor’s–expert
Skills,may be either
knowledge andanexperience
auditor’sininternal expert
a particular (who is a
field.
partner3 or staff, including temporary staff, of the auditor’s firm or a network
(c) firm), or an auditor’s
Management’s expertexternal expert. (Ref:
– An individual Para. A1-A3)possessing expertise in
or organization
a field other than accounting or auditing, whose work in that field is used by
(b) Expertise
Defini/ons…   c – Skills, knowledge and experience in a particular field.
on/nua/on  
the entity to assist the entity in preparing the financial statements.
(c)Management’s expert – An individual or organization possessing expertise in
Requirements
a field other than accounting or auditing, whose work in that field is used by
the entity to assist the entity in preparing the financial statements.
Determining the Need for an Auditor’s Expert
Requirements
Requirements:    Determining  the  Need  for  an  Auditor’s  Expert    
7. If expertise in a field other than accounting or auditing is necessary to obtain
Determiningsufficient
the Need for an Auditor’s
appropriate Expert
audit evidence, the auditor shall determine whether to use the
work of an auditor’s expert. (Ref: Para. A4-A9)
7. If expertise in a field other than accounting or auditing is necessary to obtain
sufficient appropriate audit evidence, the auditor shall determine whether to use the
Nature,
workTiming and Extent
of an auditor’s of Audit
expert. (Ref:Procedures
Para. A4-A9)

8. Timing
Nature, The nature, timing and
and Extent extentProcedures
of Audit of the auditor’s procedures with respect to the
requirements in paragraphs 9-13 of this PSA will vary depending on the
8. The circumstances.
nature, timingInand
determining
extent of the
thenature, timing
auditor’s and extentwith
procedures of those procedures,
respect to the the
requirements in paragraphs 9-13 of this PSA will vary depending on the
7. If expertise in a field other than accounting or auditing is necessary to obtain
sufficient appropriate audit evidence, the auditor shall determine whether to use the
work of an auditor’s expert. (Ref: Para. A4-A9)

Nature, Timing and Extent of Audit Procedures

8. The nature, timing and extent of the auditor’s procedures with respect to the
requirements in paragraphs 9-13 of this PSA will vary depending on the
circumstances. In determining the nature, timing and extent of those procedures, the
auditor shall consider matters including: (Ref: Para. A10)

(a) The nature of the matter to which that expert’s work relates;

(b) The risks of material misstatement in the matter to which that expert’s work
relates;

(c) The significance of that expert’s work in the context of the audit;

(d) The auditor’s knowledge of and experience with previous work performed by
that expert; and

(e) Whether that expert is subject to the auditor’s firm’s quality control policies
and procedures. (Ref: Para. A11-A13)
 circumstances. In determining the nature, timing and extent of those procedures, the
auditor shall consider
Determining the Needmatters
for anincluding:
Auditor’s (Ref: Para. A10)
Expert

7.
(a) If
Theexpertise in the
nature of a field othertothan
matter accounting
which or auditing
that expert’s is necessary to obtain
work relates;
sufficient appropriate audit evidence, the auditor shall determine whether to use the
(b) work of anofauditor’s
The risks materialexpert. (Ref: Para.
misstatement in A4-A9)
the matter to which that expert’s work
relates;
Nature, Timing and Extent of Audit Procedures
(c)
8. The nature,
The significance
timingofand
thatextent
expert’s work
of the in the context
auditor’s of the
procedures withaudit;
respect to the
requirements in paragraphs 9-13 of this PSA will vary depending on the
(d) The auditor’s knowledge
circumstances. of and
In determining theexperience withand
nature, timing previous
extent work performed
of those by the
procedures,
that expert;
auditor shalland
consider matters including: (Ref: Para. A10)

(e) (a)
WhetherThe
thatnature
expertofisthe mattertotothe
subject which that expert’s
auditor’s work relates;
firm’s quality control policies
and procedures. (Ref: Para. A11-A13)
(b) The risks of material misstatement in the matter to which that expert’s work
relates;

(c) The significance of that expert’s work in the context of the audit;

(d) The auditor’s knowledge of and experience with previous work performed by
3 thatbeexpert;
“Partner” and “firm” should read asand
referring to their public sector equivalents where relevant.
 PSA 620 (Revised and Redrafted)

The Competence, Capabilities and Objectivity of the Auditor’s Expert

9. The auditor shall evaluate whether the auditor’s expert has the necessary competence,
capabilities and objectivity for the auditor’s purposes. In the case of an auditor’s
external expert, the evaluation of objectivity shall include inquiry regarding interests
and relationships that may create a threat to that expert’s objectivity. (Ref: Para. A14-
A20)

Obtaining an Understanding of the Field of Expertise of the Auditor’s Expert

10. The auditor shall obtain a sufficient understanding of the field of expertise of the
auditor’s expert to enable the auditor to: (Ref: Para. A21-A22)

(a) Determine the nature, scope and objectives of that expert’s work for the
auditor’s purposes; and

(b) Evaluate the adequacy of that work for the auditor’s purposes.
 capabilities and objectivity for the auditor’s purposes. In the case of an auditor’s
external expert, the evaluation of objectivity shall include inquiry regarding interests
and relationships that may create a threat to that expert’s objectivity. (Ref: Para. A14-
A20)

Obtaining an Understanding of the Field of Expertise of the Auditor’s Expert

10. The auditor shall obtain a sufficient understanding of the field of expertise of the
auditor’s expert to enable the auditor to: (Ref: Para. A21-A22)

(a) Determine the nature, scope and objectives of that expert’s work for the
auditor’s purposes; and

(b) Evaluate the adequacy of that work for the auditor’s purposes.

Agreement with the Auditor’s Expert

11. The auditor shall agree, in writing when appropriate, on the following matters with
the auditor’s expert: (Ref: Para. A23-A26)

(a) The nature, scope and objectives of that expert’s work; (Ref: Para. A27)

(b) The respective roles and responsibilities of the auditor and that expert; (Ref:
Para. A28-A29)
Common  examples  of  expert’s  work  include:  

•   Valua/on  of  precious  stones,  works  of  arts,  real  

       estate,  and  other  specialized  assets  
•   Determina/on  of  amounts  using  specialized    
         techniques  like  actuarial  computa/ons  
•   Interpreta/on  of  technical  requirements,      
         regula/ons,  or  contracts  such  as  legal  documents            
         or  legal  /tle  to  property  
 (a) Determine the nature, scope and objectives of that expert’s work for the
auditor’s purposes; and

(b) Evaluate the adequacy of that work for the auditor’s purposes.

Agreement with the Auditor’s Expert

11. The auditor shall agree, in writing when appropriate, on the following matters with
the auditor’s expert: (Ref: Para. A23-A26)

(a) The nature, scope and objectives of that expert’s work; (Ref: Para. A27)

(b) The respective roles and responsibilities of the auditor and that expert; (Ref:
Para. A28-A29)

(c) The nature, timing and extent of communication between the auditor and that
expert, including the form of any report to be provided by that expert; and
(Ref: Para. A30)

(d) The need for the auditor’s expert to observe confidentiality requirements. (Ref:
Para. A31)

Evaluating the Adequacy of the Auditor’s Expert’s Work

12. The auditor shall evaluate the adequacy of the auditor’s expert’s work for the
auditor’s purposes, including: (Ref: Para. A32)
 expert, including the form of any report to be provided by that expert; and
(Ref: Para. A30)

(d) The need for the auditor’s expert to observe confidentiality requirements. (Ref:
Para. A31)

Evaluating the Adequacy of the Auditor’s Expert’s Work

12. The auditor shall evaluate the adequacy of the auditor’s expert’s work for the
auditor’s purposes, including: (Ref: Para. A32)

(a) The relevance and reasonableness of that expert’s findings or conclusions, and
their consistency with other audit evidence; (Ref: Para. A33-A34)

(b) If that expert’s work involves use of significant assumptions and methods, the
relevance and reasonableness of those assumptions and methods in the
circumstances; and (Ref: Para. A35-A37)

(c) If that expert’s work involves the use of source data that is significant to that
expert’s work, the relevance, completeness, and accuracy of that source data.
(Ref: Para. A38-A39)

4
 PSA 620 (Revised and Redrafted)

13. If the auditor determines that the work of the auditor’s expert is not adequate for the
auditor’s purposes, the auditor shall: (Ref: Para. A40)

(a) Agree with that expert on the nature and extent of further work to be
performed by that expert; or

(b) Perform further audit procedures appropriate to the circumstances.

Reference to the Auditor’s Expert in the Auditor’s Report

14. The auditor shall not refer to the work of an auditor’s expert in an auditor’s report
containing an unmodified opinion unless required by law or regulation to do so. If
such reference is required by law or regulation, the auditor shall indicate in the
auditor’s report that the reference does not reduce the auditor’s responsibility for
the audit opinion. (Ref: Para. A41)

15. If the auditor makes reference to the work of an auditor’s expert in the auditor’s
EvaluaNng  the  Auditor’s  Expert  
1.   Assess  the  competence  and  objec/vity  of  the  
expert.  
2.  Understand  the  field  of  the  exper/se  of  
auditor’s  expert.  
3.  Establish  the  terms  of  agreement  with  the  
expert.  
4.  Evaluate  the  results  of  the  work  of  the  expert.  
 (a) Agree with that expert on the nature and extent of further work to be
performed by that expert; or

(b) Perform further audit procedures appropriate to the circumstances.

Reference to the Auditor’s Expert in the Auditor’s Report

14. The auditor shall not refer to the work of an auditor’s expert in an auditor’s report
containing an unmodified opinion unless required by law or regulation to do so. If
such reference is required by law or regulation, the auditor shall indicate in the
auditor’s report that the reference does not reduce the auditor’s responsibility for
the audit opinion. (Ref: Para. A41)

15. If the auditor makes reference to the work of an auditor’s expert in the auditor’s
report because such reference is relevant to an understanding of a modification to the
auditor’s opinion, the auditor shall indicate in the auditor’s report that such reference
does not reduce the auditor’s responsibility for that opinion. (Ref: Para. A42)

***

Application and Other Explanatory Material

Common  examples  of  expert’s  work  include:  

1.   Valua/on  of  precious  stones,  works  of  arts,  

real  estate,  and  other  specialized  assets  
2.   Determina/on  of  amounts  using  specialized  
techniques  like  actuarial  computa/ons  
3.   Interpreta/on  of  technical  requirements,  
regula/ons,  or  contracts    such  as  legal  
documents  or  legal  /tle  to  property  
Common  examples  of  expert’s  work  include:  

4.   Determina/on  of  work  in  progress  

5.   Es/ma/ng  quan//es  such  as  mineral  
reserves  
6.  Es/ma/ng  useful  lives  (appraisals)  
7.  Valua/on  of  complex  financial  instruments  
Application and Other Explanatory Material
Definitions

Auditor’s Expert (Ref: Para. 6(a))

Defini/ons:    Auditor’s  Expert  
A1. Expertise in a field other than accounting or auditing may include expertise in relation
to such matters as:
• The valuation of complex financial instruments, land and buildings, plant and
machinery, jewelry, works of art, antiques, intangible assets, assets acquired and
liabilities assumed in business combinations and assets that may have been
impaired.
• The actuarial calculation of liabilities associated with insurance contracts or
employee benefit plans.
• The estimation of oil and gas reserves.
• The valuation of environmental liabilities, and site clean-up costs.
• The interpretation of contracts, laws and regulations.
• The analysis of complex or unusual tax compliance issues.

A2. In many cases, distinguishing between expertise in accounting or auditing, and

expertise in another field, will be straightforward, even where this involves a
specialized area of accounting or auditing. For example, an individual with expertise
in applying methods of accounting for deferred income tax can often be easily
Philippine Standard on Auditing 610 (Revised 2013)

Using the Work of Internal Auditors and

Related Conforming Amendments
 material shaded in gray pertaining to the use of internal auditors to provide direct assistance, which is
effective for audits of financial statements for periods ending on or after December 15, 2014.)

CONTENTS
Philippine Standard on Auditing 610 (Revised 2013)
Paragraph
Using the Work of Internal Auditors and
PSA  610  -­‐   Related Conforming Amendments
Introduction

Scope of this PSA ............................................................................................................................. 1-5

Relationship between PSA 315 (Revised) and PSA 610 (Revised 2013) ....................................... 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
 (c) If using internal auditors to provide direct assistance, to appropriately direct, supervise and
review their work.

Definitions
PSA  610  -­‐  Defini/on:    Internal  Audit  Func/on  

14. For purposes of the PSAs, the following terms have the meanings attributed below:

(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

Introduction
ScopePSA  
of this610-­‐Scope:  
PSA  Using  the  Work  of  Internal  Auditors  
1. This Philippine Standard on Auditing (PSA) 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 PSA does not apply if the entity does not have an internal audit function. (Ref: Para. A2)
Basically  external  auditors,  audit  the  
3. If the entity has an internal audit function, the requirements in this PSA relating to using the work of
financial  statements  
that function do not apply if:
Internal  auditors  focus  on  internal  controls,  
(a) governance  
The responsibilities andpactivities
rocesses  
of the&  function
opera/onal  
are not relevant to the audit; or
effec/veness  
(b) Based on the auditor’s preliminary understanding of the function obtained as a result of
procedures performed under PSA 315 (Revised),1 the external auditor does not expect to use
the work of the function in obtaining audit evidence.
1. This Philippine Standard on Auditing (PSA) 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
using the work of internal auditors. This includes (a) using the work of the internal audit function in
obtainingaudit
obtaining auditevidence
evidenceandand(b)(b)using
usinginternal
internalauditors
auditorstotoprovide
providedirect
directassistance
assistanceunder
underthethe
direction,supervision
direction, supervisionand
andreview
reviewofofthetheexternal
externalauditor.
auditor.

2.2. PSA  
ThisPSA
This 6PSA doesnotnotapply
10-­‐Scope:  
does apply
 U ifsing  
if thetheentity
entity does
the  
does nothave
have
Wnotork   f  an
oan internalaudit
Internal  
internal audit function.(Ref:
Afunction.
uditors   (Ref:Para.
Para.A2)A2)

3.3. If the
If theentity
entityhashasananinternal
internalauditauditfunction,
function,thetherequirements
requirementsin inthisthisPSA
PSArelating
relatingtotousing
usingthethework
workofof
thatfunction
that functiondodonotnotapply
applyif: if:
(a)(a) The
Theresponsibilities
responsibilitiesand
andactivities
activitiesofofthethefunction
functionarearenotnotrelevant
relevanttotothetheaudit;
audit;oror
(b)(b) Based
Basedononthetheauditor’s
auditor’spreliminary
preliminaryunderstanding
understandingofofthethefunction
functionobtained
obtainedasasa aresult
resultofof
procedures performed under PSA 315 (Revised),thetheexternal
procedures performed under PSA 315 (Revised), externalauditor
auditordoes
doesnotnotexpect
expecttotouseuse
1 1

thethework
workofofthethefunction
functionin inobtaining
obtainingaudit
auditevidence.
evidence.
Nothing
NothingininthisthisPSA
PSArequires
requiresthetheexternal
externalauditor
auditortotouse
usethethework
workofofthetheinternal
internalaudit
auditfunction
functiontoto
modify the nature or timing, or reduce the extent, of audit procedures to be performed directly by
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
the external auditor; it remains a decision of the external auditor in establishing the overall audit
strategy.
strategy.
4. Furthermore, the requirements in this PSA relating to direct assistance do not apply if the external
4. Furthermore, the requirements in this PSA relating to direct assistance do not apply if the external
auditor does not plan to use internal auditors to provide direct assistance.
auditor does not plan to use internal auditors to provide direct assistance.
5. In some jurisdictions, the external auditor may be prohibited, or restricted to some extent, by law or
 the external auditor; it remains a decision of the external auditor in establishing the overall audit
strategy.

4. Furthermore, the requirements in this PSA relating to direct assistance do not apply if the external
PSA  
auditor610-­‐Scope:  
does not plan to  Uuse
sing   the  
internal Work  
auditors of  Internal  
to provide Auditors  
direct assistance.

5. In some jurisdictions, 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 PSAs 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 PSAs. (Ref: Para. A31)

Relationship between PSA 315 (Revised) and PSA 610 (Revised 2013)

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.
 statements.2 Such prohibitions or restrictions will therefore not prevent the external auditor from
complying with the PSAs. (Ref: Para. A31)

Relationship between
PSA  610:   PSA 315 (Revised)
Rela/onship   and PSA 610
between   (Revised
PSA   315  a2013)
nd  PSA  610  (Revised  2013)  
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. PSA 315 (Revised) 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. PSA 315 (Revised) 3 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.

1
PSA 315 (Revised), Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its
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
PSA  
charged610-­‐Rela/onship  
with governance. between  PSA  315  and  PSA  610  (Revised  2013)  

7. PSA 315 (Revised) 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. PSA 315 (Revised) 3 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.

1
PSA 315 (Revised), Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its
Environment
2
PSA 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Philippine
Standards on Auditing, paragraph A55
3
PSA 315 (Revised), paragraph A116

3
 Rela/onship  between  PSA  315  and  PSA  610  (Revised  2013)  
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 PSA 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 PSA 315 (Revised), 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 PSA 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.
 external auditor.

9. In addition, this PSA 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. between  PSA  315  and  PSA  610  (Revised  2013)  
Rela/onship  
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 PSA 330. 5

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 PSA 200.6 This PSA, therefore, defines the conditions 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 PSA 330. 5

PSA  6Auditor’s
The External 10-­‐The  Responsibility
External  Auditor’s   Responsibility  for  the  Audit  
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 PSA 200.6 This PSA, 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 PSA is effective for audits of financial statements for periods ending on or after December 15,
2013, except for material shaded in gray pertaining to the use of internal auditors to provide direct
 2013, except for material shaded in gray pertaining to the use of internal auditors to provide direct
assistance, which is effective for audits of financial statements for periods ending on or after
December 15, 2014.

Objectives
PSA  610  -­‐  Objec/ves  
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
4
auditors to provide direct assistance, are:
See paragraphs 15-25.
5
PSA(a)330, The
To Auditor’s
determine whether
Responses the workRisks
to Assessed of the internal audit function or direct assistance from internal
6
auditors can be used, and if so, in which areas and to what extent;
PSA 200, paragraph 14
and having made that determination: 4
(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 PSAs, the following terms have the meanings attributed below:
 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
Requirements:    Determining  whether,  in  which  areas,  and  to  what  Extent  the  
   Can Be Used                              Work  of  the  Internal  Audit  Func/on  Can  Be  Used  
   PSA610  
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
 (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  D
Requirements:   theetermining  
internal auditw
function applies
hether,   in  wahich  
systematic andand  
areas,   disciplined approach,
to  what   including
Extent   the  
     PSA610    quality
                   control. (Ref:
     Work   of  Para.
the  IA10-A11)
nternal  Audit  Func/on  Can  Be  Used  
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)

5
Requirements:    Determining  the  Nature  and  Extent  of  Work  of  Internal  Audit    
     Determining
       PSA610  
the      Nature
                 and
           Extent
         Func/on  
of Work ofCthe
an  Internal
Be  Used  
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 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
 external
Determining theauditor’s overall
Nature and audit
Extent strategy
of Work andInternal
of the audit plan.
Audit (Ref: Para.
Function thatA15-A17)
Can Be Used
18.
17. The As aexternal
basis forauditor determining shall make all significant
the areas judgments
and the extent in thetheaudit
to which workengagement
of the internal and, to prevent
audit function
undue
can beuse of the
used, the work external of theauditor internalshallaudit function,theshall
consider planand
nature to use
scope lessofofthe
thework work that
of the
hasfunction
been
Requirements:   and perform or
performed, more of the work
 isDetermining  
planned to directly:
he  (Ref:
be tperformed, Para.
Nature   aA15-A17)
by the nd   Extent  
internal of  function
audit Work  oand
f  Internal   Audit  
its relevance  
to the
                     external
PSA610                      overall
auditor’s                  audit
Func/on  
strategyCan  
andBaudit
e  Uplan.
sed  (Ref: Para. A15-A17)
(a) The more judgment is involved in:
18. The external auditor shall make all significant judgments in the audit engagement and, to prevent
(i) Planning and performing relevant audit procedures; and
undue use of the work of the internal audit function, shall plan to use less of the work of the function
(ii) Evaluating
and perform more of thethe work audit evidence
directly: (Ref:gathered; (Ref: Para. A18-A19)
Para. A15-A17)
(b)
The more
(a) higherjudgment
the assessed riskin:of material misstatement at the assertion level, with special
is involved
consideration given to risks identified as significant; (Ref: Para. A20-A22)
(i) Planning and performing relevant audit procedures; and
(c) The less the internal audit function’s organizational status and relevant policies and
(ii) Evaluating the audit evidence gathered; (Ref: Para. A18-A19)
procedures adequately support the objectivity of the internal auditors; and
(b) The higher the assessed risk of material misstatement at the assertion level, with special
(d) The lower the level of competence of the internal audit function.
consideration given to risks identified as significant; (Ref: Para. A20-A22)
19. The
(c) external
The less auditor shall alsoaudit
the internal evaluate whether,
function’s in aggregate,
organizational usingand
status the relevant
work of the internal
policies andaudit
function to the extent
procedures plannedsupport
adequately would still result in theof external
the objectivity auditor
the internal beingand
auditors; sufficiently involved in the
audit, given the external auditor’s sole responsibility for the audit opinion expressed. (Ref: Para . A15-
(d) The lower the level of competence of the internal audit function.
A22)
19. The external auditor shall also evaluate whether, in aggregate, using the work of the internal audit
20. The external auditor shall, in communicating with those charged with governance an overview of
 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
Requirements:    Determining  the  Nature  and  Extent  of  Work  of  Internal  Audit    
                     (d) The lower
PSA610                the
       level
             of  Fcompetence
unc/on  Cofan  
theBinternal audit function.
e  Used  
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 PSA 260,7 communicate how the
external auditor has planned to use the work of the internal audit function. (Ref: Para. A23)

Using the WorkPSA  

of the2Internal
60:    Communica/on  
Audit Function with  TCWG  

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)
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 PSA 260,7 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

 PSA610-­‐Requirements:   Function
 Using   the  Work  of  the  Internal  Audit  Func/on  
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 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
 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
     PSA610   it performed and
-­‐  Requirements:    Uthe related
sing   the  findings.
Work  of  the  Internal  Audit  Func/on  
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 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)
7
PSA 260, Communication with Those Charged with Governance, paragraph 15
24. The nature and extent of the external auditor’s audit procedures shall be responsive to the external
auditor’s evaluation of: 6

(a) The amount of judgment involved;

(b) The assessed risk of material misstatement;

 (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)
     PSA610-­‐Requirements:    Using  the  Work  of  the  Internal  Audit  Func/on  
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 PSA 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 PSA 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
 use of the work of the function for purposes of the audit in paragraphs 18-19 of this PSA remain
appropriate.

Determining Whether, in Which Areas, and to What Extent Internal Auditors Can Be Used to
Provide Direct Assistance

Requirements:  
Determining Whether  Determining   Internal Auditors whether  
Can Be the   IA  ctoan  
Used be  Used  
Provide Direct to  Assistance
Provide  Dfor
irect   Assistance  
Purposes of the
   Audit
   PSA610                                                for  purposes  of  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 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) 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
Requirements:    Determining  the  Nature  &  Extent  of  Work  that  Can  Be  Assigned  to  IA  
     Assistance
   PSA610                                                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
8
See paragraph
(ii) 18. Evaluating the audit evidence gathered;
7
(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
 (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
Requirements:   and level of competencethe  
 Determining   of the internal&auditors
Nature   who
 Extent   of  will be providing
Work   such
that  Can   Be  assistance.
Assigned  (Ref:
to  IA  
Para.
           PSA610              A35-A39)
                               Providing  Direct  Assistance  
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 PSA regarding the internal
audit function and the use of its work or direct assistance. (Ref: Para. A35-A39)

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
PSA 260,9 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
 (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 PSA regarding the internal
Requirements:    Determining  the  Nature  &  Extent  of  Work  that  Can  Be  Assigned  to  IA  
audit    function
                 PSA610                          and the use ofDits
Providing   workAorssistance  
irect   direct assistance. (Ref: Para. A35-A39)

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
PSA 260,9 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:
 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
     PSA610   -­‐  RAuditors to Provide
equirements:   DirectIAs  
 Using   Assistance
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.

9
PSA 260, paragraph 15

8
          PSA610-­‐  Requirements:    Using  Internal  Auditors  to  Provide  Direct  Assistance  

34. The external auditor shall direct, supervise and review the work performed by internal auditors on
the engagement in accordance with PSA 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 PSA; 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,
PSA  2supervision
20:    Quality  and reviewfor  
Control   byAthe external
udits   auditor Fofinancial  
of  Historical   the workStatements  
performed by the internal
auditors shall be sufficient in order for the external auditor to be satisfied that the internal auditors have
obtained sufficient 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
 (iii) Whether the function appliesadequately
a systematic support the objectivity of the internal auditors;
and disciplined approach, including quality
(ii) The level of competence of the function; and
control;
(iii) Whether the function applies a systematic and disciplined ap
(b) The nature and extent of the work used and the basis for that decision; and
control;

(b) The nature and extent of the work used and the basis for that deci
(c) The audit procedures performed by the external auditor to evaluate the adequacy of the work
(c) The audit procedures performed by the external auditor to evaluat
used.
       PSA610  -­‐  Documenta/on   used.

37. If the external auditor uses internal auditors to provide direct assistance
37. If the external auditor usesauditor
internal shall
auditors to provide direct assistance on the audit, the external
include in the audit documentation:
auditor shall include in the (a)
audit documentation:
The evaluation of the existence and significance of threats to the o
auditors, and the level of competence of the internal auditors
(a) The evaluation of the existence and significance of threats to the objectivity of the internal
assistance;
auditors, and the level
(b) of The
competence
basis forofthe
thedecision
internal auditors
regardingused
thetonature
provideanddirect
extent of the w
assistance; internal auditors;

(c) Who reviewed the work performed and the date and extent of that
(b) The basis for the decision regarding
PSA 230; the11nature and extent of the work performed by the
internal auditors;

(c) Who reviewed thePSA

work220,
10
performed and the date and extent of that review in accordance with
Quality Control for an Audit of Financial Statements
PSA 230;11 11
PSA 230, Audit Documentation

9
(d) The written agreements obtained from an authorized representative of the entity and the
internal auditors under paragraph 33 of this PSA; and

10
(e) The working papers prepared by the internal auditors who provided direct assistance on the
PSA 220, Quality Control for an Audit of Financial Statements
audit engagement.
11
PSA 230, Audit Documentation

9***

Application and Other Explanatory Material

Definition of Internal Audit Function (Ref: Para. 2, 14(a))
True  or  false  
1.    In  financial  audit,  the  auditor  may  use  work  of  
other  professionals  in  obtaining  sufficient  
appropriate  audit  evidence.  
2.    Generally,  the  auditor  may  rely  on  the  work  of  
an  internal  auditor  if  the  internal  auditor  is  
competent  and  objec/ve.  
3.  PSA  330  deals  with  the  auditor’s  responsibili/es    
       regarding  the  use  of  an  individual  or  
       organiza/on’s  work  in  a  field  of  exper/se  other  
       than  accoun/ng  or  audi/ng,  when  that  work  is  
         used  to  assist  the  auditor  in  obtaining  sufficient  
         appropriate  audit  evidence.    
4.  An  auditor  must  evaluate  an  expert’s    
               professional  qualifica/ons  and  understand  the    
               objec/ves  of  the  expert’s  work.  
5.    The  auditor  has  sole  responsibility  for  the  audit  
         opinion  expressed,  and  that  responsibility  is    
         reduced  by  the  auditor’s  use  of  the  work  of  an  
         auditor’s  expert.    
6.  The  auditor  shall  demand  from  the  management    
             whether  they  have  given  no/ce  from  the  
             service  organiza/on  (management’s  expert)  of  
           any  fraud,  NOCLAR  or  uncorrected  misstatements  
             that  could  affect  the  financial  statements.  
7.  Management’s  expert  is  an  individual  or  
       organiza/on  possessing  exper/se  in  a  field  other    
       than  accoun/ng  or  audi/ng,  whose  work  in  that    
       field  is  used  by  the  en/ty  to  assist  the  en/ty  in    
       preparing  the  financial  statements.    
8.  The  objec/ves  and  scope  of  an  internal  audit  
             func/on,  the  nature  of  its  responsibili/es  and  its  
             organiza/onal  status,  including  the  func/on’s  
             authority  and  accountability,  vary  widely  and  
           depend  on  the  size  and  structure  of  the  en/ty  
           and  the  requirements  of  management  and,  
             where  applicable,  TCWG.  
9.  An  auditor’s  expert  may  be  either  an  auditor’s  
       internal  expert  (who  is  a  partner  or  staff,  including  
       temporary  staff,  of  the  auditor’s  firm  or  a  network  
       firm),  or  an  auditor’s  external  expert.    
10.  The  use  of  internal  auditors  to  perform  audit  
             procedures  under  the  direc/on,  supervision  and  
             review  of  the  external  auditor  is  called  internal  
             audit  func/on.    
11.  The  auditor  shall  determine  whether  to  use  the    
         work  of  an  auditor’s  expert,  if  exper/se  in  the    
         field  of  accoun/ng  or  audi/ng  is  necessary  to  
         obtain  sufficient  appropriate  audit  evidence.    
.    
12.  The  auditor  is  not  expected  to  have  the  experNse  
         required  to  pracNce  his  profession  or  occupaNon  
         because  not  all  engagement  would  not  require  
         the  help  of  an    expert.  

.    
13.  The  auditor  shall  evaluate  whether  the  auditor’s  
         expert  has  the  necessary  competence,  capabili/es  
         and  independence  for  the  auditor’s  purposes.  

 In  the  case  of  an  auditor’s  external  expert,  the  

evalua/on  of  objec/vity  shall  include  inquiry  
regarding  interests  and  rela/onships  that  may  create  
a  threat  to  that  expert’s  objec/vity.    
14.  If  the  auditor  makes  reference  to  the  work  of  an  
         auditor’s  expert  in  the  auditor’s  report  because  
such  reference  is  relevant  to  an  understanding  of  
a  modifica/on  to  the  auditor’s  opinion,  the  
auditor  shall  indicate  in  the  auditor’s  report  that  
such  reference  does  reduce  the  auditor’s  
responsibility  for  that  opinion.    
15.  If  in  preparing  the  financial  statements  
           management  does  not  possess  the  necessary  
exper/se,  a  management’s  expert  may  be  used  
in  addressing  those  risks.  Relevant  controls,  
including  controls  that  relate  to  the  work  of  a  
management’s  expert,  if  any,  may  also  reduce  
the  risks  of  material  misstatement.    
MULTIPLE  CHOICES  
1.  Each  of  the  following  procedures  requires  the  
assistance  of  an  expert,  except  
a.  Determining  the  physical  condi/on  or  quan/ty  of  
undergroud  mineral  
b.  Determining  the  value  of  works  of  art  
c.  Determining  the  adequacy  of  disclosure  in  the  
notes  to  F/S  
d.  Interpre/ng  major  contracts  
2.    The  independent  auditors  might  consider  the  
procedures  performed  by  the  internal  auditors  
because:  
a.  They  are  employees  whose  work  must  be  reviewed  
during  substan/ve  tes/ng    
b.  They  are  employees  whose  work  might  affect  the  
independent  auditor’s  work.  
c.  Their  work  impacts  upon  the  cost/benefit  tradeoff  in  
evalua/ng  inherent  limita/ons  
d.  Their  degree  of  independence  may  be  inferred  by  the  
nature  of  their  work.  
3.    The  risk  that  an  expert’s  objec/vity  will  be  
impaired  increases  when  the  expert  is  related  in  
some  other  manner  to  the  en/ty  &  the  expert  is  
a.  Engaged  by  the  en/ty  
b.  Employed  by  the  en/ty  
c.  Engaged  by  the  auditor  
d.  Employed  by  the  auditor  
4.    Which  of  the  following  is  most  correct  regarding  
external  auditors  use  of  internal  auditors  directly  
on  the  audit  engagement?  
a.  Permited  
b.  Encouraged  
c.  Prohibited  
d.  Discouraged  
5.    Which  of  the  following  statements  is  correct  about  
the  auditor’s  use  of  the  work  of  a  specialist?  
a.  The  specialist  should  not  have  an  understanding  of  the  
auditor’s  corrobora/ve  use  of  the  specialist’s  findings  
b.  The  auditor  is  required  to  perform  substan/ve  procedures  
to  verify  the  specialist’s  assump/ons  &  findings  
c.  The  auditor  should  obtain  an  understanding  of  the  methods  
and  assump/ons  used  by  the  specialist.  
d.  The  client  should  not  have  an  understanding  of  the  nature  
of  the  work  to  be  performed  by  the  specialist  
6.  Before  the  auditor  may  use  the  work  of  internal  
       auditors,  the  auditor  shall  first  evaluate  which  of  the  
       following?  
a.  The  relevance  of  internal  audit  func/on  to  the  
external  auditor’s  purposes  
b.  The  use  of  specific  work  of  the  internal  auditors  
c.  The  adequacy  of  the  work  of  internal  auditor  to  
the  purposes  of  the  audit.  
d.  All  of  the  above  
7.  In  determining  the  nature,  /ming  and  extent  of  those  
procedures,  the  auditor  shall  consider  ma9ers  including:  
I.  The  auditor’s  knowledge  of  and  experience  with  previous  work  
performed  by  that  expert  
II.  Whether  that  expert  is  subject  to  the  auditor’s  firm’s  quality  
control  policies  and  procedures.    
III.  The  nature  of  the  ma9er  to  which  that  expert’s  work  relates  
IV.  The  ROMM  in  the  ma9er  to  which  that  expert’s  work  relates  
V.  The  significance  of  that  expert’s  work  in  the  context  of  the  audit  

a.  I,  III,  IV  and  V  only                                                      c.    I,  II  and  III  only  
b.  All  of  the  above                                                              d.    I,  II,  IV  and  V  only  
8.  To  assess  the  objec/vity  of  the  internal  auditors,  an  
         independent  auditor  would  most  likely:  
a.  Consider  the  organiza/onal  level  to  which  the  internal  
auditors  report  the  results  of  their  work.  
b.  Consider  the  professional  qualifica/ons  and  experience  of  the  
internal  auditors  
c.  Consider  the  proper  planning,  supervision  and  documenta/on  
of  internal  auditor’s  work  
d.  Consider  the  nature  and  extent  of  internal  auditor’s  
assignment  
9.  An  auditor  who  is  not  an  expert  in  a  relevant  field  other  than  accoun/ng  or    
         audi/ng  may  nevertheless  be  able  to  obtain  a  sufficient  understanding  
         of  that  field  to  perform  the  audit  without  an  auditor’s  expert.    
           This  understanding  may  be  obtained  through:  

I.  Experience  in  audi/ng  en//es  that  require  such  exper/se  in  the  prepara/on  
               of    their  financial  statements.    
II.  The  risk  of  material  misstatement  of  this  ma9er.  
III.  Educa/on  or  professional  development  in  the  par/cular  field.    
IV.  Discussion  with  auditors  who  have  performed  similar  engagements.    

a.  I,  II  and  III  only                                                                            c.  I,  III  and  IV  only  
b.  I,  II  and  IV  only                                                                            d.  III  and  IV  only  
10.  The  nature,  /ming  and  extent  of  audit  procedures  with  respect  to  the  
           requirements  will  vary  depending  on  the  circumstances.  Below  are    
             factors  that  may  suggest  the  need  for  different  or  more  extensive  
             procedures  than  would  otherwise  be  the  case:    
I.  The  work  of  the  auditor’s  expert  relates  to  a  significant  ma9er  that  involves  
             subjec/ve  and  complex  judgments.    
II.        The  auditor  has  not  previously  used  the  work  of  the  auditor’s  expert,  &  
               has  no  prior  knowledge  of  that  expert’s  competence,  capabili/es  and  
               objec/vity.    
III.  The  auditor’s  expert  is  performing  procedures  that  are  integral  to  the  audit,  
               rather  than  being  consulted  to  provide  advice  on  an  individual  ma9er.    
IV.        The  expert  is  an  auditor’s  external  expert  and  is  not,  therefore,  subject  to  
                 the  firm’s  quality  control  policies  and  procedures.    
a.  I,  II  and  III  only                                                                            c.  I,  III  and  IV  only  
b.  All  of  the  above                                                                        d.  none  of  the  above  
11.    When  determining  the  need  to  use  the  work  of  
an  expert,  the  auditor  would  consider  the  
following,  except  
a.  The  professional  cer/fica/on  or  licensing  by,  or  
membership  in,  an  appropriate  professional  body  
b.  The  quan/ty  and  quality  of  other  audit  evidence  
available  
c.  The  materiality  of  the  F/S  item  being  considered  
d.  The  ROMM  based  on  the  nature  &  complexity  of  
the  ma9er  being  considered.  
12.    The  auditor  intends  to  use  the  work  of  an  actuary  
who  has  a  rela/onship  with  the  client.    Under  
these  circumstances,  the  auditor:  
a.  Is  required  to  disclose  the  contractual  rela/onship  in  the  
auditor’s  report  
b.  Should  assess  the  risk  that  the  actuary’s  objec/vity  
might  be  impaired  
c.  Is  not  permi9ed  to  rely  on  the  actuary  because  of  a  lack  
of  independence.  
d.  Should  communicate  this  ma9er  to  TCWG  as  a  
significant  deficiency  in  internal  control.  
13.  The  work  of  internal  auditors  may  affect  the  independent’s  
               auditor’s    
I.  Procedures  performed  in  obtaining  an  understanding  of  internal  
control  
II.  Procedures  performed  in  assessing  the  risk  of  material  
misstatement.    
III.  Substan/ve  procedures  performed  in  gathering  direct  evidence  

a.  I  and  III  only                                                                        c.    I  and  II  only  

b.  All  of  the  above                                                            d.    II    and  III  only  
14.  The  objec/ves  of  the  auditor  under  PSA  620  are:  
a.  To  determine  whether  to  use  the  work  of  an  
auditor’s  expert  
b.  To  determine  whether  that  work  is  adequate  for  
the  auditor’s  purposes,  if  using  the  work  of  an  
auditor’s  expert.  
c.  Only  a  
d.  Both  a  and  b  
15.  External  auditor  would  consider  internal  auditors  
             effec/ve  if  they  are  :  
a.  Independent  of  the  opera/ng  units  being  
evaluated  
b.  Competent  and  well-­‐trained  
c.  Have  performed  relevant  audit  tests  of  the  internal  
controls  and  financial  statements  
d.  All  of  the  above  
16.  If  the  external  auditor  has  considered  the  following  
           factors,  he  shall  not  use  the  work  of  the  internal  audit  
           func/on,  except:  
a.  The  func/on’s  organiza/onal  status  and  relevant  policies  
and  procedures  do  not  adequately  support  the  objec/vity  
of  internal  auditors  
b.  The  func/on  lacks  sufficient  competence  
c.  It  has  performed  relevant  audit  tests  of  the  internal  controls  
and  financial  statements  
d.  The  func/on  does  not  apply  a  systema/c  and  disciplined  
approach,  including  quality  control.    
17.  The  auditor  shall  evaluate  the  adequacy  of  the  auditor’s  expert’s  work  
             for  the  auditor’s  purposes,  except:  
I.  The  relevance  and  reasonableness  of  that  expert’s  findings  or  conclusions,    
         and  their  consistency  with  other  audit  evidence  
II.  If  that  expert’s  work  involves  use  of  significant  assump/ons  and  methods,    
           the  relevance  and  reasonableness  of  those  assump/ons  and  methods      
           in  the  circumstances  
III.    If  that  expert’s  work  involves  the  use  of  source  data  that  is  significant  to    
             that  expert’s  work,  the  relevance,  completeness,  and  accuracy  of  that    
             source  data.    
IV.  Agree  with  that  expert  on  the  nature  and  extent  of  further  work  to  be  
         performed  by  that  expert;    
a.  I  only                                                                                              c.  III  only  
b.  I  &  II  only                                                                                d.  IV  only  
18.  You  have  been  asked  to  assess  the  organiza/onal  independence    
           of  an  internal  audit  ac/vity.    You  should  consider  all  the  following    
           factors,  except:  
a.  Func/onal  repor/ng  to  the  board  and  administra/ve  repor/ng  to  
the  chief  execu/ve  officer    
b.   The  criteria  of  educa/on  and  experience  considered  necessary  
when  filling  vacant  posi/ons  on  the  internal  audit  staff  
c.  The  degree  to  which  internal  auditors  assume  opera/onal  
responsibili/es  
d.  A  limita/on  on  the  scope  of  objec/ves  for  the  engagements  
included  in  the  review    
19.  Each  of  the  following  procedures  requires  the  assistance  of  an  
             expert,  except:  
a.  Determining  the  physical  condi/on  or  quan/ty  of  underground  
mineral  
b.  Determining  the  value  of  works  of  art  
c.  Determining  the  adequacy  of  disclosure  in  the  notes  to  financial  
statements  
d.  Interpre/ng  the  major  contracts  
20.  For  which  of  the  following  judgments  may  an  independent    
           auditor  share  responsibility  with  an  en/ty’s  internal  auditor    who  
             is  assessed  to  be  both  competent  and  objec/ve?  

Materiality  of   EvaluaNon  of   Opinion  

Misstatements   AccounNng  EsNmates   Expressed  
a   yes   no   yes  
b   no   no   no  
c   no   yes   no  
d   yes   yes   yes