Page 103 - DCOM509_ADVANCED_AUDITING

Advanced Auditing

Notes 4. Responsibility: The responsibility of external auditor is very wide and covers almost all
stakeholders of the company. However, the internal auditor, who is an employee of the
company, is only responsible to the management.
5. Power: The external auditor being appointed by law has statutory powers to conduct
audit. He has very wide powers compare to internal auditor. The power of internal auditor
comes from the views of management. In many companies, internal auditor also has very
wide power and he reports directly to audit committee of the company.
6. Submission of Reports: External auditor submits his report to the owners or shareholders.
But an internal auditor submits his report to management.
7. Periodicity: External audit may be conducted on an annual or on a periodical basis. But
internal auditor reviews the operations of a company continuously i.e. throughout the
year.

!
Caution The scope of scrutiny by Internal Audit has been continuously enlarged and in
1969 it was made coterminous with that the Receipt Audit.

6.7 Co-operation between External Auditor and Internal Auditor

In spite of the various dissimilarities mentioned above, there is ample scope of a gainful
cooperation and coordination between external auditor and internal auditor. Due to his
professional standing, the external auditor acquires a wide area of experiences, whereas internal
auditor has an in-depth experience of the organization. If they work in tandem, the quality of
audit will improve tremendously.
Unnecessary duplications of work can also be avoided by proper audit plan. The work load of
external auditor can be reduced significantly as we know that inherent objectives and approaches
of both the audit are same.

In order to determine, whether and to what extent the external auditor will depend and rely on
the work of an internal auditor is given by SA 610, relying upon the work of an internal auditor,
issued by the Institute of Chartered Accountants of India (ICAI). The important points of the
standards are summarized below:
1. Assessing the work of internal auditor: The external auditor should assess the quality of
work done by internal auditor before relying upon the work of the latter. He should
essentially consider factors such as:
(a) Competence

(b) Independence and
(c) Objectivity of the internal auditor while evaluating his work.
2. Co-ordination: It can be achieved by:

(a) Meetings with internal auditor
(b) Access to relevant audit reports and
(c) Communication by the internal auditor of any significant information, which may
affect his work.

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