WIREDGOV

• enable better use, in making the external auditor’s risk assessments, of the knowledge and findings of the internal audit function;
• strengthen the external auditor’s evaluation of the work of the internal audit function in obtaining audit evidence; and
• resolve the ambiguity as to whether the ISAs permit the use of internal audit staff as members of the external audit engagement team to perform audit procedures (referred to as ‘direct assistance’).

 
Prior to these revisions, the IAASB’s standards were not explicit about whether or not direct assistance by internal audit staff was permitted. The FRC’s own standards included additional guidance that allowed direct assistance in certain circumstances, subject to appropriate safeguards.

The IAASB’s proposed revised ISAs are expected to take a similar approach.  The FRC Board concluded that, because using internal audit staff as members of the audit engagement team is contrary to the principle of independence, this should no longer be permitted.  This was also the advice of the Audit and Assurance Council.
 
Nick Land, FRC Board member and chairman of the Audit and Assurance Council, said,
 

 
The consultation on timing of implementation will remain open for a period of two months to 12 April 2013.

Notes to editors:

1. The FRC is responsible for promoting high quality corporate governance and reporting to foster investment.  We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work.  We represent UK interests in international standard-setting.  We also monitor and take action to promote the quality of corporate reporting and auditing.  We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.

2. The proposed changes set out in the original 2012 consultation paper are to International Standards on Auditing (ISAs) (UK and Ireland):

3. The Feedback Statement describes the changes that will be made to the proposed revised ISA (UK and Ireland) 610, as issued for consultation by the FRC in May 2012, to implement the prohibition on obtaining direct assistance from internal auditors.

4. Not permitting direct assistance would not represent a divergence from ISA 610 (Revised). The IAASB makes clear that its requirements and guidance in this area will not be applicable in jurisdictions where direct assistance in prohibited.

5. All Press enquiries should be directed to: Sophie Broom, Communications Executive, on telephone: 020 7492 2395  or email: s.broom@frc.org.uk.