AS 5 encourages the external auditor to consider the work of the internal audit in accumulating audit evidence when performing an integrated audit of internal control and financial statements.
a. What information does the external auditor use to assess the internal auditor's objectivity?
b. Can the internal auditor attain the same level of objectivity in an audit as the external auditor? Explain.
c. An external auditor is considering whether to rely on the work performed by a client's internal audit function. The following is known about the internal audit function:
i. The internal audit function undergoes periodic external quality reviews to address the quality of its audits and the compliance of the audits with the International Standards for the Professional Practice of Internal Auditing. The quality reviews also examine the quality-control procedures used by the function. The internal audit function has always received high marks in these reviews.
ii. The internal audit function has a history of hiring high-quality staff and subsequently placing that staff in management positions.
iii. The company has a reputation for hiring technologically competent auditors.
Based what is known about the internal audit function, present arguments for and against relying on the internal audit function's work. What additional information should the external auditor consider before determining the quality of the internal audit function?