SAG10 Notes By Neeraj Arora FullVideo Available on ‘ SAECO Deals vith External | Auditoy Recporsibinty Tolera sing a work ef; Auditor Using ra vorR Using 1A ‘Interna: Audit fo Prowido Fun chow OA un der D/Ss/R & EA This SA is not Applicable Enhhy Dass no} Entity has TAF haut’ an TAF > Resbonsibintiss EA das not and Achuines expect fo Ue nchon oso Mme U0 64 tho Not Qssuen rr Audit Audlitoy Does not Plan to use tre Direct Aecictanca of TA Tre Requirement of fhe SA Tetating © DA voi Notes Appr. TAF in obtaining Ae- Basid on Prelim Understanding IA be Obtainud as a Recut Procodusc bppiud u Ca cI”Relationship bus é10 4315 | gbtarring Knowvdge xpodenee After Prelim. of TA understanding 4 Ie 4, Twpact tho EA’. 1 rou AILUS “P + Hee) unsactondl of o€ uditor Ascicng © Enuronmn fo Uce Mme work . Tdsnfipeation & oh AF Aeeeesment-afROMM BIO Addourcces ID tas akon dus to ui voor of IA BIS *b F jy Provecusnss . - obhatn Prettmn- naenstanding oh) TAS + Ruditor expock tour te Work oh TAT for oblaaning AE + SAEIO & into me pI + Deals vor Resp: pp heater bila uste work TAF 2 6 of TA ureter Ds) Reh €A SA G10 Notes By Neeraj Arora Full Video Available on YTsaTeftafg- comprehensive Module For CA IPCC Auditing & Assurance cs. The ‘+ objectives and scope of an internal audit function, # the nature ofits responsibilities and its organizational status, SAG10 Notes By Neeraj Arora FullVideo Available on YT 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. SA 315 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. In other words knowledge and experience of the internal audit function can have impact on the auditor’s understanding of the entity and its environment and identification and assessment of risks of material misstatement SA 610 addresses the external auditor's responsibilities when, based on the external auditor's preliminary understanding of the internal audit function o ined as a result of procedures performed under SA 315, the external auditor expects to use the work of the internal audit function as part of the audit evidence obtained. Cte at uditor as per SA 610 Where the entity has internal audit function and the external auditor expects to use the work of the function to modify the nature or timing, of reduce the extent, of audit procedures to be performed directly by the external auditor, or to use internal auditors to provide direct assistance (He can do so but the he cannot his responsibility of expressing opinion on financial statements) ‘The objectives of the external auditor are: ‘+ To determine whether the work of the internal audit function or direct assistance from internal auditors can be used, and itso, in which areas and to what extent; FM (work and direct assistance) THOT AHS C SAT ST at Sty SIS RATA gH Fa and having made that determination ‘+ Ifusing the work of the internal audit function, to determine whether that work is adequate for purposes of the audit; and (a ae UE Ua eT Fora H YH wera S AV gar ah adequate BWI siifSe) ‘+ Ifusing internal auditors to provide direct assistance, to appropriately direct, supervise and review their work. (Aur agar internal auditors ki direct assistance le rahe hai toh unke kam ko appropriately OSR karna hai) CA Neeraj Arora Page 5.7sateftafg- comprehensive Module For CA IPCC Auditing & Assurance cs. For purposes of the SAs, the following terms have the meanings attributed below: 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 rnanagement and internal control processes. Diract assistance — The use of internal auditors perform audit procedures under the direction, supervision and review of the external auditor. ner 1. Evaluating the internal audit function 2. Determining the nature and extent of the work of the internal audit function that can be used 3. Using the work of internal audit function Evaluating the internal audit function The external auditor shall determine whether the work of the internal audit function can be used for purposes of the aucit by evaluating the following: ‘* The extent to which the internal audit function’s organizational status and relevant policies and procedures support the 9f the internal auditors; . Whether the internal aul function apples systematic and disciplined approach ‘The external auditor shall not use the work of the internal audit function ifthe external auditor determines that: function; and including quality control ‘+The function's organizational status and relevant policies and procedures do not adequately support the objectivity of internal auditors; ‘+ The function lacks sufficient competence; or ‘+ The function does not apply a systematic and disciplined approach, including quality control. Determi ing the nature and extent of the work of the internal audit function that can be used * the external auditor shall consider the nature and scope of the = work that has been performed, = ors planned to be performed, by the internal audit function and © itsrelevance to the external auditor’s overall audit strategy and audit plan CA Neeraj Arora Page 5.8‘sateftafg- comprehensive Module For CA IPCC Auditing & Assurance cs. ‘+ 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. ‘+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 responsibilty for the audit opinion expressed. '* 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 SA 260, communicate how the external auditor has planned to use the work of the internal audit function Using the Work of the Internal Audit Function * If the external auditor plans to use the work of the internal audit function, the external auditor shall discuss the planned use ofits work with the function as a basis for coordinating their respective activities ‘¢ 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. ‘+ 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: ©The work of the function had been properly planned, performed, supervised, reviewed and documented; Sufficient appropriate evidence had been obtained to enable the function to draw reasonable conclusions; and Conclusions reached are appro} jate in the circumstances and the reports prepared by the function are consistent with the results of the work performed. 1. Determining Whether internal Auditors Can Be Used to Provide Direct Assistance for Purposes of the Audit 2. Determining the Nature and Extent of Work that Can Be Assigned to Internal Auditors Providing Direct Assistance: 3. Using internal Aucitors to Provide Direct Assistance g Whether Internal Auditors Can Be Used to Provide Direct Assistance for Purposes of the Audit ‘+ tf using internal auditors to provide direct assistance is NOt prohibited by law or regulation, and the external auditor plans to USe intemal auditors to provide direct assistance on the audit, CA Neeraj Arora Page 5.9‘sateftafg- comprehensive Module For CA IPCC Auditing & Assurance cs. the external auditor shall evaluate the existence and significance of threats to objectivity and + the level of Competence of the intemal auctors who will be providing such assistance. ‘+ The external auditor’s evaluation of the existence and significance of threats tothe internal auditors’ objectivity shall Include inquiry ofthe internal auditors regarding interests and relationships that may create a threat to thelr objectivity ‘The external auditor Shall Mot USe an internal auditor to provide direct assistance if (a) There are Significant threats to the objectivity ofthe internal auditor, or (b) The internal auditor lacks sufficient Competence to perform the proposed work. Determining the Nature and Extent of Work that Can Be Assigned to Internal Auditors Providing Direct Assistance ‘+ In determining the nature and extent of WOFK that may be ASSighed 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 © The amount of judgment involved in + Planning and performing relevant audit procedures; and + Evaluating the audit evidence gathered; 9 Theassessed risk of material misstatement; and The external auditor’ 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. ‘= Having appropriately evaluated whether and, ifso, to what extent internal auditors can be used to provide direct assistance Con the audit, the external auditor shall, in communicating with those charged with governance in accordance with SA 260, 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 af the engagement. ‘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 ‘+ Prior to using internal auditors to provide direct assistance for purposes of the audit, the external auditor shall © Obtain Written agreement from an authorized representative ofthe entity th internal auditors will be allowed to follow the external auditor's Instructions, and that the entity will not CA Neeraj Arora Page 5.10sateftafg- comprehensive Module For CA IPCC Auditing & Assurance cs. Intervene in the work the internal auditor performs for the external auditor; and © Obtain written agreement from the internal auditors that they will keep confidential specific matters as instructed by the external auditor and inform objectivity e external auditor of any threat to their + The external au {OF shall direct, supervise and review the work performed by internal auditors on the engagement in accordance with SA 220. ‘+ The direction, supervision and review by the ext 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. Peete I the external auditor uses the work of the internal audit function, the external auditor shall include in the audit documentation nal auditor of the work performed by the internal auditors shall be + The evaluation of: © Whether the function’s organizational status and relevant policies and procedures adequately support the objectivity of the internal auditors; The level of competence of the function; and Whether the function applies @ systematic and disciplined approach, including quality control; ‘© The nature and extent of the work used and the basis for that decision; and ‘+The audit procedures performed by the external auditor to evaluate the adequacy of the work used. Ifthe external auditor uses internal auditors to provide direct assistance on the aucit, the external auditor shall include in the audit documentation: + The evaluation of the existence and significance of threats to the objectivity of the internal auditors, and the level lof competence of the internal auditors used to provide direct assistance; * The basis for the decision regarding the nature and extent of the work performed by the internal auditors; * Who reviewed the work performed and the date and extent of that review in accordance with SA 230 * The written agreements obtained from an authorized representative of the entity and the internal auditors under paragraph 33 of this SA; and '* The working papers prepared by the internal auditors who provided direct assistance on the audit engagement. Audit Risk & Its Components Discuss in brief the types of audit risk and inter relationship of components of audit risk. Types of Audit Risk: Audit risk is the risk that an auditor may give an inappropriate opinion on financial information which is materially misstated, CA Neeraj Arora Page 5.11Requirernents DETER MINE DETERM) NE + Lohethen 2» Wher « vobich Areas « vobrch Ayeas » what Extent « What Extent Y uv . The work of IRF Internat Auditors Can ba and. Can ba uvd te Prowde DA C Datailing Jain ) Evaluating the Using tha Tnema) ait work funchon, Ine Determine mg Natu ard e@xyent of tha work, LAF Hat Gay be used SA 610 Notes By Neeraj Arora Full Video Available on YT \DETER MINE Lohethen « which Areas what Extent Y The werk of IRF Can ba ase <—_Aramarant using 34 Orbe: tour) pinchon. TALE %. Diseuss tht Plan Determing me Nahvw use ard extent of tha + Riad Reports “waned cea TAF + IAF that bo age cin Related to oe a Swot, of TAF Nahuw 2 So} woorke Reatent at & Pex i the fo be a pf Bramy tal pning tou PPM Sattiarn? Retevane Audit Procedus Front Urdu on work aby ace LAF Per Nore vee Diveetly Sufft canty fnvotwd wo Audit To dztermine Mequacy for SA 260 — Communicate TO punbow of, Ruait and fer Tewqg — How EA hes planned avatuating fo Use tre Work i TAF «= PPSRO « Eviasn@ — Conduction * Condusions — Appropriate in Greametences SA610 . Reborts —Consistent Notes with — work Ferformd By Neeraj Arora Full Video Available on YTDETERMINE 2 When « wobreln Ayeas a What &ctent uv . Internat Avditow Can ba ugd te —_. Prouree DA Using tag work TAU + prow! Crsent Pe Determine sobethin TA . io Can ba used fe provide DA Determine fom farboce of Rud reatuna $ Exlent WOR, that + Must net be Prohibited by law Cam be Aesianud + Exetuate eee TA al > Threats te cbjecfusy " ms i Pe 3 > low » Compekenen + Shall Not UF the work j}; G@nsidey tha . Sigeipicont Threats Duda rind Amul ons tra bb O + IN Licks suttitert | Acceceed Risk of, MMS Comb - "5 Evatuahon Threats to dbjecidihy lous oh Competeria SA 260 — Communicate to Towg = How EA bes planned fo US of TA to prowide DA Reach Mutual Undwiianding that such) Uc fin Not exeescine in Me Ciscmstanes 4 Sogagement * using TA fpr DA ui ns worn of TAF would SHI) Resutt in EA being Suiticun My Jnyolutd: in tee AuditUsing tre work 4, A to Prowide OF + Obhain Writer Agreement 2 AR of Eohhy ~ IA ic Aloud to follow tha ENS “nckuchon & Enhry voit Not Infevune + Obiain Agrceraent tor TA + Specific Mawtens ac tnchucht ba cA woin bs abt Conjidenhiad + 18 wil infom Em of ary trveate 10 thai obper uty - r= O[s|R — work Performa by A In Accovdane with 8SA22ZO + DSR ah EA on usork performed by TA Shatt bo Satficienst in Ordun me Et to be Satteficd tract TA hous oblained SLQAE to Subhort mo Concwsi07 based on tral Work, SA 610 Notes By Neeraj Arora Full Video Available on YT