SA – 600 “Using the Work of Another Auditor”

Applicability: In situation where an auditor (principal auditor - PA), reporting on the financial information of an entity, uses the work of another auditor (other auditor - OA)
w.r.t. to the financial information of one/more components (Division, Branch subsidiary, J. V. etc.), included in the financial information of the entity.
Non-applicability: (a) Joint auditors (b) Auditor’s relationship with a predecessor auditor.

Principal Auditor’s Procedures Documentation Coordination Reporting

1. Consider the professional competence of Other 1. Components whose FS are 1. Sufficient liaison/co- 1. Express a qualified /
Auditor, if Other Auditor is not a member of ICAI. audited by Other Auditor ordination between Principal disclaimer of opinion
2. Visit component and examine books of account, if and Other auditor. because of scope
and their significance to
essential. limitation:
2. Principal auditor may require
the financial information  If Principal Auditor
3. Obtain sufficient appropriate evidence, that work of Other Auditor to answer a
Other Auditor is adequate for Principal Auditor's of the entity as a whole. concludes that he
detailed questionnaire.
purposes. 2. Names of the other cannot use the work of
3. Other Auditor should
4. Discuss audit procedures applied by Other Auditor. auditors. Other Auditor;
coordinate with Principal
5. Review a written summary of Other Auditor’s 3. Any conclusions reached  PA unable to perform
Auditor:
procedures and findings through sufficient additional
that individual  Adhering to time-table.
questionnaires/checklist. procedures regarding
components are not  Bringing to the attention of
6. Consider significant findings of Other Auditor: Financial information
material. PA any significant finding.
 Discuss audit findings with OA and Management of of the component
4. Procedures performed  Compliance with relevant
component. audited by OA.
 Perform supplemental tests if necessary. regarding components. statutory requirements.
2. Report should state
7. In case Other Auditor is not a professionally qualified 5. Conclusions reached.  Respond to detailed
clearly division of
auditor - for instance, where a component is situated in questionnaire.
6. Manner of dealing with responsibility
foreign country:
Modified Report of Other
 Procedures mentioned above assume added
Auditor while finalising
importance.
Principal Auditor’s Report.

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 SA 610 (Revised) “Using the Work of Internal Auditors”

Meaning & scope of External Auditor’s Procedures w.r.t. Evaluation of Internal Using Direct Assistance (DA) of Internal Auditors (IA)

Internal Audit Function Audit Function

1 Determining whether IA can be used to provide DA
If not prohibited by law or regulation, external auditor may use an
Meaning internal auditor to provide direct assistance if:
Determine Adequacy of Internal Audit Work for
A function of an entity that (a) There are no significant threats to objectivity of internal auditor; and
External Auditor’s Purpose
(b) Internal auditor is sufficiently competent to perform proposed work.
performs assurance & 2 Determining Nature & Extent of Work that can be assigned to IA
by evaluating the following
consulting activities IA shall not be used to provide DA to perform procedures that:
(a) Involve making significant judgments in the audit;
designed to evaluate and  Obje c t i v i t y o f t h e i n t e r n al au d i t o r s;
Significant judgments include the following:
 L e v e l o f c o m p e t e nc y ;
improve the effectiveness  Assessing the risks of material misstatement;
 A p pl i c at i on o f S y st e m at i c & d i sc i p l i n ed ap p ro ach
 Evaluating the sufficiency of tests performed;
of the entity’s governance,  Evaluating appropriateness of management’s use of going
risk management and If Not Satisfactory If Satisfactory concern assumption;
 Evaluating significant accounting estimates; and
internal control processes.  Evaluating the adequacy of disclosures in the F.S., and other
Do not use the work of Determine the Nature and
extent of work of internal audit matters affecting the auditor’s report
Scope of Internal Audit internal Audit function. (b) Relate to higher assessed risks of material misstatement;
function that can be used.
(c) Relate to work with which internal auditors have been involved; or
1 Activities relating to (d) Relate to decisions, external auditor makes in accordance with this SA
governance. Use the work of internal Audit Function w.r.t. internal audit function & use of its work or direct assistance.
2 Activities relating to Risk 3 Using Direct Assistance of Internal Auditor
1. Discuss the planned use of work of internal Auditor.
Management 1. Prior to using internal auditors to provide direct assistance for
2. Read the reports of the internal audit function relating to
3 Activities relating to purposes of the audit, the external auditor shall:
Internal Control
the work of the function that the external auditor plans to (a) Obtain written agreement from entity that the IA will be allowed
 Evaluation of Internal use to obtain an understanding of the nature and extent to follow the external auditor’s instructions, and that the entity
Control of audit procedures it performed and the related findings. will not intervene in the work the IA performs; and
 Examination of 3. Perform sufficient audit procedures on work of internal (b) Obtain written agreement from the IA that they will keep
Financial and confidential specific matters as instructed by the external auditor
audit function as a whole that external auditor plans to
operating information and inform the external auditor of any threat to their objectivity.
use to determine its adequacy for purposes of the audit. 2. The external auditor shall direct, supervise and review the work
 Review of Operating
4. Evaluate whether external auditor’s conclusions performed by IA on the engagement in accordance with SA 220.
Activities
regarding internal audit function and the determination 3. The direction, supervision and review by the external auditor of the
 Review of Compliance
of the nature and extent of use of the work of the function work performed by the IA shall be sufficient in order for the external
with Laws and
auditor to be satisfied that the IA have obtained sufficient appropriate
Regulations for purposes of the audit remain appropriate.
audit evidence to support the conclusions based on that work.

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 SA 620 “Using the Work of Auditor’s Expert”

Meaning of Auditor’s Expert Procedures to be followed while using the work of auditor’s expert

 An individual or organisation 1 Determining need for an Auditor’s Expert 4 Agreement with Auditor’s Expert
 possessing expertise in field An auditor’s expert may be needed to assist the auditor for the Need to be in writing and cover the followings:
followings:  Nature, scope and Objectives of Auditor’s Expert
other than accounting/auditing,
 Obtaining an understanding of entity & its environment, including IC. work.
 whose work is used by the  Identifying and assessing the risks of material misstatement.  Respective Role and Responsibilities of Auditor
auditor  Determining & implementing overall responses to assessed risks. and auditor’s Expert.
 to assist the auditor in obtaining  Designing and performing further audit procedures to respond to  NTE of Communication including form of report.
SAAE. assessed risks.  Confidentiality requirements to be observed by
 Evaluating the sufficiency and appropriateness of audit evidence
Auditor’s Expert.
obtained.
Areas where work of AE can be
2 Evaluate Competence, Capability and Objectivity of the Expert 5 Evaluate appropriateness of Expert work
used
Source of Information for evaluation:  Finding & Conclusion – Relevance,
 Personal Experience with previous work.
Reasonableness & Consistency with other A.E.
 Valuation of complex financial  Discussion with that expert.
 Discussion with other Auditors.
 Assumptions and Methods – Relevance and
instruments, L & B, P & M, jewellery,
 Knowledge of expert’s qualification, memberships, other forms of Reasonableness.
works of art, antiques, intangible
recognitions.  Source Data – Relevance, Completeness and
assets, assets acquired and
 Published books or papers.
liabilities assumed in business accuracy.
 Auditor’s firm Q. C. Policies and Procedures.
combinations and assets that may 3 Obtain an understating of expert work 6 Expert work not adequate for audit purposes
have been impaired.  To enable the auditor to determine the nature, scope and  If Auditor concludes that work of auditor’s expert is
 Actuarial calculation of liabilities objectives of that expert’s work for auditor’s purposes. not adequate for the auditor’s purposes and
associated with insurance contracts  Evaluate the adequacy of that work for the auditor’s  auditor cannot resolve the matter through the
or employee benefit plans. additional audit procedures,
purposes.
 it may be necessary to express a modified opinion.
 Estimation of oil and gas reserves.
 Valuation of environmental
liabilities, and site clean-up costs. Reference to the Auditor’s Expert in the Auditor’s Report
 Interpretation of contracts, laws
 No reference required in case of unmodified Audit Report unless required by L & R.
and regulations.
 Analysis of complex or unusual tax  In case of modified reports, it may be appropriate to refer to the auditor’s expert, to explain the nature of the modification. In
compliance issues. such case, auditor may need the permission of the auditor’s expert before making such a reference.

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