ICPAK AUDIT MANUAL 23. USING OR RELYING ON THE WORK OF OTHERS (INCORPORATING ISA 600, 610 AND 620) 23.1. Using the Work of Another Auditor An entity may include in its financial statements the financial information of one or more components (such as a division, branch or subsidiary), which has been audited by an auditor other than the principal auditor of the entity. In such situations, the engagement team will seek to rely on the work of the other auditor. ISA 600 states, "When the principal auditor uses the work of another auditor, the principal auditor should determine how the work of the other auditor will affect the audit". When accepting appointment as the auditor, the firm, as the principle auditor, needs to consider the extent of its involvement in the overall audit. The following factors need to be considered: The materiality of the portion of financial statements being audited by the firm; > The firm's degree of knowledge of the component's business; > The risk of material misstatement in the financial statements of the component being audited by another auditor; and > The performance of additional audit procedures on the components which are being audited by another auditor. 23.1.1. The Principal Auditor's Procedures As per ISA 600, the principal auditor should consider the professional competence of the other auditor when planning to use the work of the other auditor. The engagement team will need to perform procedures to obtain sufficient appropriate audit evidence that the work of the other auditor is adequate for the purposes of the audit. For these purposes, the engagement partner would need to advise the other auditor of: > The independence requirements regarding both the entity and the component and obtain written representation as to compliance with them; > The use that is to be made of the other auditor's work and report and make sufficient arrangements for the coordination of their efforts at the initial planning stage of the audit. The other auditor should be informed of areas requiring special consideration, procedures for the identification of intercompany transactions that may require disclosure and the timetable for completion of the audit; and > The accounting, auditing and reporting requirements and obtain written representation as to compliance with them. The engagement partner will also need to consider the need to discuss with the other auditor the audit procedures applied by the other auditor. In most cases, the engagement team will require the other auditor to complete a checklist or sign a written confirmation, which highlights the audit procedures applied by the other auditor and also any further audit procedures that the engagement team requires the other auditor to perform. The engagement partner may also wish to review the working papers of the other auditor. 23. Using or Relying on the Work of Others Version 1 - 9th October 2006 1 of 5
ICPAK AUDIT MANUAL The engagement partner may consider that it is not necessary to apply the above audit procedures where previous sufficient appropriate audit