Document ID: chunk:federal_register_of_legislation:F2023C01133:reg:7:p15
Version: federal_register_of_legislation:F2023C01133
Segment Type: reg
Provision Reference: reg 7 (pt 15/17)
Character Range: 46204–49163

heightened risk of a material misstatement of the financial report or may be regarding any actual, suspected or alleged fraud, the external auditor can take this into account in the external auditor's identification of risk of material misstatement due to fraud in accordance with ASA 240.[24]

Procedures to Determine the Adequacy of Work of the Internal Audit Function  (Ref: Para. 23–24)

A27.         The external auditor's audit procedures on the body of work of the internal audit function as a whole that the external auditor plans to use provide a basis for evaluating the overall quality of the function's work and the objectivity with which it has been performed.

A28.         The procedures the external auditor may perform to evaluate the quality of the work performed and the conclusions reached by the internal audit function, in addition to re‑performance in accordance with paragraph 24, include the following:

           * Making enquiries of appropriate individuals within the internal audit function.

           * Observing procedures performed by the internal audit function.

           * Reviewing the internal audit function's work program and working papers.

A29.         The more judgement involved, the higher the assessed risk of material misstatement, the less the internal audit function's organisational status and relevant policies and procedures adequately support the objectivity of the internal auditors, or the lower the level of competence of the internal audit function, the more audit procedures are needed to be performed by the external auditor on the overall body of work of the function to support the decision to use the work of the function in obtaining sufficient appropriate audit evidence on which to base the audit opinion.

Re‑performance  (Ref: Para. 24)

A30.         For purposes of this Auditing Standard, re‑performance involves the external auditor's independent execution of procedures to validate the conclusions reached by the internal audit function.  This objective may be accomplished by examining items already examined by the internal audit function, or where it is not possible to do so, the same objective may also be accomplished by examining sufficient other similar items not actually examined by the internal audit function.  Re‑performance provides more persuasive evidence regarding the adequacy of the work of the internal audit function compared to other procedures the external auditor may perform in paragraph A28.  While it is not necessary for the external auditor to do re‑performance in each area of work of the internal audit function that is being used, some re‑performance is required on the body of work of the internal audit function as a whole that the external auditor plans to use in accordance with paragraph 24.  The external auditor is more likely to focus re‑performance in those areas where more judgement was exercised by the internal audit function in planning,