HKSA 610 - Using the Work of Internal Auditors
1. INTRODUCTION AND SCOPE
HKSA 610 (Revised 2013) deals with the external auditor's responsibilities when using the work of internal auditors. This includes two distinct areas:
- Using the work of the internal audit function in obtaining audit evidence
- Using internal auditors to provide direct assistance under the direction, supervision, and review of the external auditor
Effective Date: Audits of financial statements for periods ending on or after 15 December 2014.
Key Updates Applied:
- Quality Management amendments (effective for periods beginning on or after 15 December 2022)
- HKSA 315 (Revised 2019) amendments (effective for periods beginning on or after 15 December 2021)
2. WHEN THIS STANDARD DOES NOT APPLY
This HKSA does not apply when:
- The entity does not have an internal audit function
- The responsibilities and activities of the internal audit function are not relevant to the audit
- Based on the auditor's preliminary understanding, the external auditor does not expect to use the work of the function in obtaining audit evidence
- The external auditor does not plan to use internal auditors to provide direct assistance
Important: Nothing in this HKSA requires the external auditor to use the work of the internal audit function. It remains the external auditor's decision in establishing the overall audit strategy.
3. RELATIONSHIP WITH HKSA 315 (REVISED 2019)
| Aspect | HKSA 315 (Revised 2019) | HKSA 610 (Revised 2013) |
|---|---|---|
| -------- | ------------------------ | ------------------------ |
| Purpose | Understanding the entity and its environment, identifying and assessing risks | Using internal audit work as audit evidence |
| Focus | Informing risk assessment | Modifying nature, timing, or extent of audit procedures |
| Output | Risk assessment | Use of internal audit work or direct assistance |
4. EXTERNAL AUDITOR'S SOLE RESPONSIBILITY
Critical Rule: The external auditor has sole responsibility for the audit opinion expressed. This responsibility is not reduced by using the work of the internal audit function or internal auditors providing direct assistance.
Neither the internal audit function nor internal auditors are independent of the entity as required of the external auditor under HKSA 200.
5. OBJECTIVES
The objectives of the external auditor are:
(a) To determine whether the work of the internal audit function or direct assistance from internal auditors can be used, and if so, in which areas and to what extent
(b) If using the work of the internal audit function, to determine whether that work is adequate for purposes of the audit
(c) If using internal auditors to provide direct assistance, to appropriately direct, supervise, and review their work
6. KEY DEFINITIONS
| Term | Definition |
|---|---|
| ------ | ----------- |
| 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 management, and internal control processes |
| Direct Assistance | The use of internal auditors to perform audit procedures under the direction, supervision, and review of the external auditor |
Note: Activities similar to internal audit may be conducted by functions with other titles or outsourced to third-party service providers. The nature of activities, objectivity, competence, and systematic approach determine applicability, not the title.
7. DETERMINING WHETHER THE WORK OF THE INTERNAL AUDIT FUNCTION CAN BE USED
7.1 Evaluation Criteria (Paragraph 15)
The external auditor shall evaluate three factors:
| Factor | Key Considerations |
|---|---|
| -------- | ------------------- |
| (a) Objectivity | Organizational status, policies and procedures supporting freedom from bias, conflict of interest, or undue influence |
| (b) Competence | Knowledge and skills of the function as a whole; technical training; professional designations; industry knowledge |
| (c) Systematic and Disciplined Approach | Documented procedures; risk assessments; work programs; quality control policies |
7.2 When the Work CANNOT Be Used (Paragraph 16)
The external auditor shall not use the work of the internal audit function if:
(a) The function's organizational status and relevant policies and procedures do not adequately support the objectivity of internal auditors
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(b) The function lacks sufficient competence
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(c) The function does not apply a systematic and disciplined approach, including quality control
7.3 Factors Affecting Objectivity (Paragraph A7)
- Whether the function reports to those charged with governance or has direct access to them
- Whether the function is free of conflicting responsibilities (e.g., managerial or operational duties)
- Whether those charged with governance oversee employment decisions for the function
- Whether there are constraints or restrictions placed on the function by management
- Whether internal auditors are members of relevant professional bodies
7.4 Factors Affecting Competence (Paragraph A8)
- Whether the function is adequately and appropriately resourced
- Whether established policies exist for hiring, training, and assigning internal auditors
- Whether internal auditors have adequate technical training and proficiency
- Whether internal auditors possess required knowledge of financial reporting and applicable framework
- Whether internal auditors are members of relevant professional bodies with CPD requirements
7.5 The Continuum of Objectivity and Competence (Paragraph A9)
Key Principle: Objectivity and competence may be viewed as a continuum. Strong objectivity cannot compensate for lack of competence, and high competence cannot compensate for inadequate objectivity.
8. DETERMINING THE NATURE AND EXTENT OF WORK TO USE
8.1 Factors Influencing Use (Paragraph 18)
The external auditor shall plan to use less of the work of the internal audit function and perform more work directly when:
| Factor | Explanation |
|---|---|
| -------- | ------------- |
| (a) More judgment involved | In planning, performing audit procedures, and evaluating evidence |
| (b) Higher assessed risk of material misstatement | Especially significant risks |
| (c) Less support for objectivity | Weaker organizational status and policies |
| (d) Lower competence level | Less skilled internal audit function |
8.2 Examples of Work That Can Be Used (Paragraph A16)
- Testing operating effectiveness of controls
- Substantive procedures involving limited judgment
- Observations of inventory counts
- Tracing transactions through the information system
- Testing compliance with regulatory requirements
- Audits or reviews of financial information of non-significant subsidiaries
8.3 Significant Judgments Reserved for External Auditor (Paragraph A19)
Critical: The external auditor must make all significant judgments, including:
- Assessing risks of material misstatement
- Evaluating sufficiency of tests performed
- Evaluating appropriateness of management's use of going concern assumption
- Evaluating significant accounting estimates
- Evaluating adequacy of disclosures in financial statements
9. USING THE WORK OF THE INTERNAL AUDIT FUNCTION
9.1 Discussion and Coordination (Paragraph 21)
The external auditor shall discuss the planned use of work with the internal audit function, addressing:
- Timing of work
- Nature of work performed
- Extent of audit coverage
- Materiality levels
- Methods of item selection and sample sizes
- Documentation requirements
- Review and reporting procedures
9.2 Reading Reports (Paragraph 22)
The external auditor shall read the reports of the internal audit function relating to the work planned to be used.
9.3 Procedures to Determine Adequacy (Paragraph 23)
The external auditor shall perform sufficient audit procedures on the body of work as a whole, including evaluating whether:
(a) The work had been properly planned, performed, supervised, reviewed, and documented
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(b) Sufficient appropriate evidence had been obtained to enable reasonable conclusions
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(c) Conclusions reached are appropriate and reports are consistent with results
9.4 Nature and Extent of Procedures (Paragraph 24)
The nature and extent of procedures shall be responsive to:
- Amount of judgment involved
- Assessed risk of material misstatement
- Support for objectivity
- Level of competence
Mandatory Requirement: The procedures shall include reperformance of some of the work.
9.5 Reperformance (Paragraph A30)
Definition: Reperformance involves the external auditor's independent execution of procedures to validate conclusions reached by the internal audit function.
This may be accomplished by:
- Examining items already examined by the internal audit function, OR
- Examining sufficient other similar items not actually examined by the internal audit function
10. USING INTERNAL AUDITORS FOR DIRECT ASSISTANCE
10.1 Evaluation Before Use (Paragraph 27)
If using internal auditors for direct assistance is not prohibited, the external auditor shall evaluate:
- Existence and significance of threats to objectivity (including inquiry about interests and relationships)
- Level of competence of the internal auditors
10.2 When Direct Assistance CANNOT Be Used (Paragraph 28)
The external auditor shall not use an internal auditor to provide direct assistance if:
(a) There are significant threats to the objectivity of the internal auditor
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(b) The internal auditor lacks sufficient competence to perform the proposed work
10.3 Work That CANNOT Be Assigned (Paragraph 30)
The external auditor shall not use internal auditors to provide direct assistance to perform procedures that:
(a) Involve making significant judgments in the audit
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(b) Relate to higher assessed risks of material misstatement where judgment required is more than limited
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(c) Relate to work with which internal auditors have been involved and which has been or will be reported to management or those charged with governance
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(d) Relate to decisions the external auditor makes regarding the internal audit function and use of its work or direct assistance
10.4 Examples of Inappropriate Assignments (Paragraph A36)
- Discussion of fraud risks (though inquiries may be made)
- Determination of unannounced audit procedures
- Maintaining control over external confirmation requests (though assistance in assembling information is acceptable)
10.5 Written Agreements Required (Paragraph 33)
Prior to using internal auditors for direct assistance, the external auditor shall obtain:
(1) Written agreement from an authorized representative of the entity that:
- Internal auditors will follow the external auditor's instructions
- The entity will not intervene in the work
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(2) Written agreement from the internal auditors that:
- They will keep confidential specific matters as instructed
- They will inform the external auditor of any threat to their objectivity
10.6 Direction, Supervision, and Review (Paragraph 34)
The external auditor shall direct, supervise, and review work performed by internal auditors in accordance with HKSA 220 (Revised). Key requirements:
- Nature, timing, and extent shall recognize that internal auditors are not independent of the entity
- Review procedures shall include the external auditor checking back to underlying audit evidence for some of the work
- Direction, supervision, and review must be sufficient to determine that sufficient appropriate audit evidence has been obtained
11. COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE
When using the work of the internal audit function (Paragraph 20):
Communicate how the external auditor has planned to use the work of the internal audit function.
When using internal auditors for direct assistance (Paragraph 31):
Communicate the nature and extent of planned use of internal auditors to provide direct assistance to reach a mutual understanding that such use is not excessive.
12. DOCUMENTATION REQUIREMENTS
12.1 When Using Work of Internal Audit Function (Paragraph 36)
The audit documentation shall include:
| Item | Description |
|---|---|
| ------ | ------------- |
| (a) Evaluation of objectivity, competence, and systematic and disciplined approach | |
| (b) Nature and extent of work used and basis for that decision | |
| (c) Audit procedures performed to evaluate adequacy of work used |
12.2 When Using Direct Assistance (Paragraph 37)
The audit documentation shall include:
| Item | Description |
|---|---|
| ------ | ------------- |
| (a) Evaluation of threats to objectivity and level of competence of internal auditors used | |
| (b) Basis for decision regarding nature and extent of work performed | |
| (c) Who reviewed the work, date and extent of review | |
| (d) Written agreements obtained from entity representative and internal auditors | |
| (e) Working papers prepared by internal auditors providing direct assistance |
13. KEY TAKEAWAYS SUMMARY
| Area | Key Principle |
|---|---|
| ------ | --------------- |
| Sole Responsibility | External auditor's responsibility for audit opinion is never reduced |
| Three Evaluation Factors | Objectivity, Competence, Systematic and Disciplined Approach |
| Cannot Use Work | If any of the three factors is inadequate |
| More Judgment = Less Use | Higher judgment areas require more direct external auditor work |
| Higher Risk = Less Use | Higher assessed risks require more direct external auditor work |
| Reperformance Required | Some reperformance of internal audit work is mandatory |
| Direct Assistance Restrictions | Cannot involve significant judgments, higher risks, or self-review threats |
| Written Agreements | Required from both entity and internal auditors before direct assistance |
| Documentation | Comprehensive documentation of evaluations, decisions, and procedures |
PART II: TRADITIONAL CHINESE STUDY NOTES (傳統中文學習筆記)
香港審計準則第610號（經修訂）— 利用內部審計師的工作
1. 引言及範圍
HKSA 610（經修訂） 處理外部審計師在利用內部審計師工作時的責任，包括兩個不同範疇：
- 利用內部審計職能的工作以獲取審計證據
- 利用內部審計師提供直接協助，在外部審計師的指導、監督和覆核下進行
生效日期： 適用於2014年12月15日或之後結束的財務報表審計。
最新修訂：
- 質量管理修訂（適用於2022年12月15日或之後開始的期間）
- HKSA 315（經修訂2019）修訂（適用於2021年12月15日或之後開始的期間）
2. 不適用情況
本準則在以下情況不適用：
- 實體沒有內部審計職能
- 內部審計職能的職責和活動與審計無關
- 根據初步了解，外部審計師不預期利用該職能的工作
- 外部審計師不計劃利用內部審計師提供直接協助
重要提示： 本準則不要求外部審計師必須利用內部審計職能的工作。這仍然是外部審計師在制定整體審計策略時的決定。
3. 外部審計師的獨有責任
關鍵規則： 外部審計師對所發表的審計意見承擔獨有責任，此責任不會因利用內部審計職能的工作或內部審計師提供直接協助而減少。
內部審計職能及內部審計師均不具備外部審計師根據HKSA 200所要求的獨立性。
4. 目標
外部審計師的目標是：
(a) 確定是否可以利用內部審計職能的工作或內部審計師的直接協助，以及在哪些領域和多大程度上利用
(b) 如利用內部審計職能的工作，確定該工作是否足夠用於審計目的
(c) 如利用內部審計師提供直接協助，適當指導、監督和覆核其工作
5. 關鍵定義
| 術語 | 定義 |
|---|---|
| ------ | ------ |
| 內部審計職能 | 實體內執行保證和諮詢活動的職能，旨在評估和改進實體的治理、風險管理和內部控制過程的有效性 |
| 直接協助 | 利用內部審計師在外部審計師的指導、監督和覆核下執行審計程序 |
6. 確定是否可利用內部審計職能的工作
6.1 評估標準（第15段）
外部審計師須評估三個因素：
| 因素 | 關鍵考慮 |
|---|---|
| ------ | --------- |
| (a) 客觀性 | 組織地位、政策和程序是否支持內部審計師免受偏見、利益衝突或不當影響 |
| (b) 勝任能力 | 整個職能的知識和技能；技術培訓；專業資格；行業知識 |
| (c) 系統化和規範化方法 | 書面程序；風險評估；工作方案；質量控制政策 |
6.2 何時不能利用工作（第16段）
外部審計師不得利用內部審計職能的工作，如果：
(a) 該職能的組織地位及相關政策和程序未能充分支持內部審計師的客觀性
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(b) 該職能缺乏足夠的勝任能力
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(c) 該職能未採用系統化和規範化的方法，包括質量控制
7. 確定利用工作的性質和範圍
7.1 影響利用程度的因素（第18段）
外部審計師應計劃減少利用內部審計職能的工作，並更多直接執行工作，當：
| 因素 | 說明 |
|---|---|
| ------ | ------ |
| (a) 涉及更多判斷 | 在規劃、執行審計程序和評估證據時 |
| (b) 評估的重大錯報風險較高 | 特別是重大風險 |
| (c) 客觀性支持較弱 | 組織地位和政策較弱 |
| (d) 勝任能力較低 | 內部審計職能技能較低 |
7.2 可被利用的工作示例（第A16段）
- 測試控制運作有效性
- 涉及有限判斷的實質性程序
- 觀察存貨盤點
- 追查交易通過信息系統
- 測試監管合規性
- 審計或審閱非重要子公司的財務信息
7.3 保留給外部審計師的重大判斷（第A19段）
關鍵： 外部審計師必須作出所有重大判斷，包括：
- 評估重大錯報風險
- 評估所執行測試的充分性
- 評估管理層使用持續經營假設的恰當性
- 評估重大會計估計
- 評估財務報表披露的充分性
8. 利用內部審計職能的工作
8.1 討論與協調（第21段）
外部審計師須與內部審計職能討論計劃利用其工作，涵蓋：
- 工作時間安排
- 工作性質
- 審計覆蓋範圍
- 重要性水平
- 項目選擇方法和樣本規模
- 文件記錄要求
- 覆核和報告程序
8.2 確定充分性的程序（第23段）
外部審計師須對整體工作執行足夠的審計程序，包括評估：
(a) 工作是否已適當規劃、執行、監督、覆核和記錄
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(b) 是否已獲取充分適當的證據以得出合理結論
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(c) 得出的結論是否恰當，報告是否與工作結果一致
8.3 重新執行要求（第24段）
強制要求： 程序必須包括重新執行部分工作。
重新執行定義： 外部審計師獨立執行程序以驗證內部審計職能得出的結論。
9. 利用內部審計師提供直接協助
9.1 何時不能使用直接協助（第28段）
外部審計師不得利用內部審計師提供直接協助，如果：
(a) 內部審計師的客觀性存在重大威脅
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(b) 內部審計師缺乏足夠勝任能力執行擬議工作
9.2 不能分配的工作（第30段）
外部審計師不得利用內部審計師提供直接協助執行以下程序：
(a) 涉及在審計中作出重大判斷
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(b) 涉及較高評估的重大錯報風險，且所需判斷超過有限程度
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(c) 涉及內部審計師已參與並已或將向管理層或治理層報告的工作
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(d) 涉及外部審計師就內部審計職能及其工作或直接協助作出的決定
9.3 書面協議要求（第33段）
在利用內部審計師提供直接協助前，外部審計師須取得：
(1) 來自實體授權代表的書面協議：
- 內部審計師將遵循外部審計師的指示
- 實體不會干預工作
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(2) 來自內部審計師的書面協議：
- 他們將按指示對特定事項保密
- 他們將告知外部審計師任何對其客觀性的威脅
10. 文件記錄要求
10.1 利用內部審計職能工作時（第36段）
審計文件須包括：
- 對客觀性、勝任能力和系統化方法的評估
- 所用工作的性質和範圍及決策依據
- 為評估所用工作充分性而執行的審計程序
10.2 利用直接協助時（第37段）
審計文件須包括：
- 對客觀性威脅和勝任能力的評估
- 關於工作性質和範圍的決策依據
- 覆核人員、日期和範圍
- 從實體代表和內部審計師取得的書面協議
- 內部審計師編製的工作底稿
11. 關鍵要點總結
| 範疇 | 關鍵原則 |
|---|---|
| ------ | --------- |
| 獨有責任 | 外部審計師對審計意見的責任永不減少 |
| 三個評估因素 | 客觀性、勝任能力、系統化和規範化方法 |
| 不能利用工作 | 如三個因素中任何一個不足 |
| 更多判斷=更少利用 | 較高判斷領域需要更多外部審計師直接工作 |
| 較高風險=更少利用 | 較高評估風險需要更多外部審計師直接工作 |
| 重新執行要求 | 必須重新執行部分內部審計工作 |
| 直接協助限制 | 不能涉及重大判斷、較高風險或自我覆核威脅 |
| 書面協議 | 使用直接協助前須從實體和內部審計師取得 |
| 文件記錄 | 全面記錄評估、決策和程序 |
APPENDIX: 50 MULTIPLE CHOICE QUESTIONS
Q1. According to HKSA 610 (Revised 2013), what is the external auditor's responsibility when using the work of internal auditors?
A. The external auditor's responsibility is reduced proportionally to the work used
B. The external auditor shares responsibility with the internal audit function
C. The external auditor has sole responsibility for the audit opinion expressed
D. The external auditor's responsibility is eliminated for areas where internal audit work is used
Answer: C
Q2. Which of the following is NOT a factor the external auditor must evaluate when determining whether the work of the internal audit function can be used?
A. The extent to which organizational status supports objectivity
B. The level of competence of the internal audit function
C. The profitability of the internal audit function
D. Whether the function applies a systematic and disciplined approach
Answer: C
Q3. When must the external auditor NOT use the work of the internal audit function?
A. When the function reports to management
B. When the function lacks sufficient competence
C. When the function has limited resources
D. When the function is outsourced to a third party
Answer: B
Q4. What is "direct assistance" as defined in HKSA 610?
A. The internal audit function performing its regular duties
B. The use of internal auditors to perform audit procedures under the direction, supervision, and review of the external auditor
C. The external auditor providing guidance to the internal audit function
D. The internal audit function assisting management in preparing financial statements
Answer: B
Q5. Which of the following is a factor that affects the external auditor's evaluation of the objectivity of the internal audit function?
A. Whether the function has adequate technical training
B. Whether the function reports to those charged with governance
C. Whether the function has documented procedures
D. Whether the function has quality control policies
Answer: B
Q6. According to HKSA 610, what must the external auditor include in audit documentation when using the work of the internal audit function?
A. The names of all internal auditors involved
B. The evaluation of objectivity, competence, and systematic approach
C. The budget for the internal audit function
D. The internal audit function's annual plan
Answer: B
Q7. When can the external auditor use internal auditors to provide direct assistance?
A. In all areas of the audit
B. Only when there are no significant threats to objectivity and sufficient competence exists
C. Only when the internal audit function requests it
D. Only for substantive procedures
Answer: B
Q8. What is the effective date of HKSA 610 (Revised 2013)?
A. Audits for periods ending on or after 15 December 2013
B. Audits for periods ending on or after 15 December 2014
C. Audits for periods beginning on or after 15 December 2014
D. Audits for periods ending on or after 15 December 2015
Answer: B
Q9. Which of the following procedures is the external auditor required to perform when using the work of the internal audit function?
A. Reperformance of some of the work
B. Reperformance of all of the work
C. Inquiry of management about the work
D. Observation of all internal audit activities
Answer: A
Q10. According to HKSA 610, what must the external auditor obtain before using internal auditors to provide direct assistance?
A. Verbal approval from management
B. Written agreement from an authorized representative of the entity and from the internal auditors
C. A signed contract with the internal audit function
D. Approval from those charged with governance
Answer: B
Q11. Which of the following work CANNOT be assigned to internal auditors providing direct assistance?
A. Testing operating effectiveness of controls
B. Observations of inventory counts
C. Making significant judgments in the audit
D. Tracing transactions through the information system
Answer: C
Q12. What is the relationship between objectivity and competence according to HKSA 610?
A. Strong objectivity can compensate for lack of competence
B. High competence can compensate for inadequate objectivity
C. Neither can compensate for the other
D. They are independent and unrelated factors
Answer: C
Q13. When must the external auditor communicate the planned use of the work of the internal audit function?
A. To the internal audit function only
B. To those charged with governance
C. To regulatory authorities
D. To the entity's external legal counsel
Answer: B
Q14. What does "reperformance" involve in the context of HKSA 610?
A. The internal audit function redoing its work
B. The external auditor's independent execution of procedures to validate conclusions
C. Management reviewing internal audit work
D. Those charged with governance reviewing audit procedures
Answer: B
Q15. Which of the following is an example of work of the internal audit function that can be used by the external auditor?
A. Assessing risks of material misstatement
B. Evaluating significant accounting estimates
C. Testing operating effectiveness of controls
D. Evaluating the adequacy of disclosures
Answer: C
Q16. According to HKSA 610, what should the external auditor consider when determining the nature and extent of work that may be assigned to internal auditors providing direct assistance?
A. The internal audit function's annual budget
B. The amount of judgment involved and assessed risk of material misstatement
C. The number of internal auditors available
D. The entity's industry classification
Answer: B
Q17. What is the definition of "internal audit function" according to HKSA 610?
A. A department that prepares financial statements
B. A function that performs assurance and consulting activities to evaluate governance, risk management, and internal control
C. A team that performs external audit procedures
D. A committee of the board of directors
Answer: B
Q18. When can the external auditor use the work of an outsourced internal audit function?
A. Never, as it must be an in-house function
B. Only if the outsourced provider is a CPA firm
C. When the nature of activities, objectivity, competence, and systematic approach are appropriate
D. Only with regulatory approval
Answer: C
Q19. What must the external auditor do if the internal audit function's organizational status does not adequately support objectivity?
A. Use more of the function's work to compensate
B. Not use the work of the internal audit function
C. Request management to restructure the function
D. Document the limitation and proceed with caution
Answer: B
Q20. According to HKSA 610, what should the external auditor discuss with the internal audit function when planning to use its work?
A. The internal auditors' salaries
B. The timing, nature, and extent of audit coverage
C. The entity's business strategy
D. The external auditor's fee structure
Answer: B
Q21. Which of the following is a factor affecting the evaluation of competence of the internal audit function?
A. Whether the function reports to those charged with governance
B. Whether the function has direct access to the board
C. Whether internal auditors have adequate technical training and proficiency
D. Whether the function is free of conflicting responsibilities
Answer: C
Q22. What is the external auditor's responsibility regarding the audit opinion when using internal auditors for direct assistance?
A. Shared responsibility with the internal auditors
B. Reduced responsibility for areas where direct assistance is used
C. Sole responsibility that is not reduced
D. No responsibility for work performed by internal auditors
Answer: C
Q23. According to HKSA 610, what must the external auditor evaluate before using internal auditors to provide direct assistance?
A. The internal audit function's annual report
B. The existence and significance of threats to objectivity and level of competence
C. The entity's financial performance
D. The internal audit function's budget
Answer: B
Q24. Which of the following is NOT an appropriate use of internal auditors for direct assistance?
A. Checking the accuracy of aging of accounts receivable
B. Assembling information for resolving confirmation exceptions
C. Evaluating the adequacy of provisions based on aging
D. Testing compliance with regulatory requirements
Answer: C
Q25. What must the external auditor include in audit documentation when using internal auditors for direct assistance?
A. The internal audit function's organizational chart
B. The written agreements obtained from the entity and internal auditors
C. The internal audit function's budget
D. The entity's strategic plan
Answer: B
Q26. According to HKSA 610, when should the external auditor plan to use less of the work of the internal audit function?
A. When the function has high competence
B. When the function has strong objectivity
C. When more judgment is involved in planning and performing audit procedures
D. When the function applies a systematic approach
Answer: C
Q27. What is the purpose of reading reports of the internal audit function according to HKSA 610?
A. To evaluate the function's budget
B. To obtain an understanding of the nature and extent of audit procedures performed and related findings
C. To assess the entity's financial performance
D. To evaluate management's performance
Answer: B
Q28. Which of the following is a significant judgment that must be made by the external auditor, not the internal audit function?
A. Testing operating effectiveness of controls
B. Observing inventory counts
C. Assessing risks of material misstatement
D. Tracing transactions through the information system
Answer: C
Q29. According to HKSA 610, what should the external auditor do if there are significant threats to the objectivity of an internal auditor being considered for direct assistance?
A. Use the internal auditor but with increased supervision
B. Not use that internal auditor to provide direct assistance
C. Document the threat and proceed
D. Request management to reassign the internal auditor
Answer: B
Q30. What is the relationship between HKSA 315 (Revised 2019) and HKSA 610 (Revised 2013)?
A. HKSA 610 replaces HKSA 315
B. HKSA 315 addresses understanding the entity and risk assessment, while HKSA 610 addresses using internal audit work
C. They are unrelated standards
D. HKSA 610 is a subset of HKSA 315
Answer: B
Q31. According to HKSA 610, what must the external auditor evaluate regarding the internal audit function's approach?
A. Whether it is profitable
B. Whether it applies a systematic and disciplined approach including quality control
C. Whether it is cost-effective
D. Whether it is independent of management
Answer: B
Q32. When communicating with those charged with governance about using internal auditors for direct assistance, what should the external auditor achieve?
A. Approval of the internal audit function's budget
B. A mutual understanding that such use is not excessive
C. Confirmation of the entity's financial position
D. Agreement on audit fees
Answer: B
Q33. Which of the following is an example of a factor that may affect the external auditor's evaluation of objectivity?
A. Whether the internal auditors have professional designations
B. Whether the function has adequate technical training
C. Whether the function is free of conflicting responsibilities
D. Whether the function has documented procedures
Answer: C
Q34. According to HKSA 610, what must the external auditor do if the internal audit function does not apply a systematic and disciplined approach?
A. Use more of the function's work to compensate
B. Not use the work of the internal audit function
C. Provide training to the function
D. Document the deficiency and proceed
Answer: B
Q35. What is the purpose of the external auditor's evaluation of the internal audit function's competence?
A. To determine the function's budget
B. To determine whether the work of the function can be used for audit purposes
C. To evaluate the entity's financial performance
D. To assess management's effectiveness
Answer: B
Q36. According to HKSA 610, what should the external auditor consider when determining the extent of use of the internal audit function's work?
A. The size of the internal audit function
B. The assessed risk of material misstatement at the assertion level
C. The entity's industry
D. The external auditor's fee
Answer: B
Q37. Which of the following is NOT a factor affecting the external auditor's evaluation of the internal audit function's systematic and disciplined approach?
A. Existence of documented internal audit procedures
B. Whether the function has quality control policies
C. Whether the function reports to those charged with governance
D. Whether the function conducts periodic external quality assessments
Answer: C
Q38. According to HKSA 610, what must the external auditor do prior to using internal auditors for direct assistance regarding confidentiality?
A. Obtain written agreement that internal auditors will keep confidential specific matters
B. Sign a confidentiality agreement with the entity
C. Ensure the internal audit function has confidentiality policies
D. Obtain board approval for confidentiality arrangements
Answer: A
Q39. What is the external auditor's responsibility regarding direction, supervision, and review of internal auditors providing direct assistance?
A. The same as for engagement team members
B. More extensive than for engagement team members due to lack of independence
C. Less extensive than for engagement team members
D. No specific responsibility is required
Answer: B
Q40. According to HKSA 610, when can the external auditor use the work of the internal audit function for significant risks?
A. For all procedures related to significant risks
B. Only for procedures that involve limited judgment
C. Never, for any significant risks
D. Only with management approval
Answer: B
Q41. What must the external auditor include in audit documentation regarding the evaluation of the internal audit function?
A. The function's organizational chart
B. The evaluation of objectivity, competence, and systematic approach
C. The function's annual report
D. The function's budget
Answer: B
Q42. According to HKSA 610, what is the effect of using the work of the internal audit function on the external auditor's audit procedures?
A. It eliminates the need for direct procedures
B. It may modify the nature or timing, or reduce the extent of audit procedures
C. It has no effect on audit procedures
D. It increases the extent of audit procedures
Answer: B
Q43. Which of the following is an example of a procedure that would NOT be appropriate to assign to internal auditors providing direct assistance?
A. Testing compliance with regulatory requirements
B. Observations of inventory counts
C. Discussion of fraud risks
D. Tracing transactions through the information system
Answer: C
Q44. According to HKSA 610, what should the external auditor do if the internal auditor lacks sufficient competence for proposed direct assistance work?
A. Use the internal auditor with additional supervision
B. Not use that internal auditor to provide direct assistance
C. Provide training to the internal auditor
D. Document the limitation and proceed
Answer: B
Q45. What is the purpose of the external auditor's evaluation of whether, in aggregate, using the work of the internal audit function would still result in sufficient involvement?
A. To ensure cost-effectiveness
B. To ensure the external auditor is sufficiently involved given sole responsibility for the audit opinion
C. To evaluate the internal audit function's performance
D. To determine audit fees
Answer: B
Q46. According to HKSA 610, what must the external auditor do if the internal audit function's work involves the same items the external auditor plans to test?
A. Avoid using that work
B. Perform reperformance to validate conclusions
C. Accept the work without further procedures
D. Request the function to redo the work
Answer: B
Q47. Which of the following is a factor that may affect the external auditor's determination of the nature and extent of direction, supervision, and review of internal auditors providing direct assistance?
A. The internal audit function's budget
B. The amount of judgment involved in the work
C. The entity's industry
D. The external auditor's experience
Answer: B
Q48. According to HKSA 610, what must the external auditor communicate to those charged with governance regarding the use of the internal audit function?
A. The internal audit function's budget
B. How the external auditor has planned to use the work of the internal audit function
C. The internal audit function's performance evaluation
D. The entity's internal control deficiencies
Answer: B
Q49. What is the external auditor's responsibility regarding the internal audit function's work that has been planned but not yet performed?
A. The external auditor must wait until the work is completed
B. The external auditor may consider the planned nature and scope of work
C. The external auditor cannot consider planned work
D. The external auditor must perform the work directly
Answer: B
Q50. According to HKSA 610, what should the external auditor do if indications arise that the evaluation of internal auditors providing direct assistance is no longer appropriate?
A. Continue with the current arrangement
B. Remain alert and take appropriate action
C. Immediately terminate the engagement
D. Report to regulatory authorities
Answer: B
*End of Study Notes*
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50 MCQs covering all sections. Timed at 1.25 min each (62.5 min total).
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