State the factors that the external auditor should consider before placing reliance on the work of the internal auditor

• The internal auditor‟s qualifications. He should be a qualified end experienced accountant with experience in an auditing environment.
• Past experience. If the external auditor has had some prior relationship with the internal auditor, he is in a good position to assess the degree of reliance on the latter‘s work.
• Internal auditor‟s independence. The external auditor should first ascertain whether the internal auditor did his work independent of management or perhaps his duties were compromised by pressure from management.
• Conflict of interest. If the internal auditor has some stake in the company‘s shares,then he may not be in a position to provide the external auditor with reliable, unbiased information.
• Duration of service. The external auditor should ascertain the duration the internal auditor has worked for the client company. If he has worked for long, he will be in a better position to provide relevant and reliable information to the external auditor.

Share through

Leave a Reply

Your email address will not be published.