Before placing any reliance on the work of an internal auditor, the external auditor must assess the internal auditor and his work in the following areas:

a.Independence. The internal auditor may be an employee of the organisation, but he may be able to organise his own activities and report his findings to a high level in management. an internal auditor on whom the external auditor places reliance must be independent and be able to communicate freely with the external auditor.

b. The scope and objectives of the internal audit function areas such as 6a. and b. are likely to be useful to the external auditor. but c., d. and e. may also. For example, an investigation into a fraud may supply evidence to the external auditor that the extent of the fraud is not material.

c.Due professional care. To be useful to an external auditor the internal auditor's work must be done in a professional manner. That is, it must be properly planned, controlled, recorded and reviewed. The auditor who arrives in the morning and says to himself "what shall I do today", is not much use.

d.Technical competence. Membership of a professional body with its competence and ethical implications is desirable. Ongoing training in specialist areas, such as computers, is useful.

e.Reporting standards. A useful internal auditor will provide high standard reports which are acted upon by management.

f.Resource available. An internal audit department that is starved of resources will not be very useful to the external auditor.

The assessment should be thorough and fully documented and included in the working papers. If the conclusion is that the internal audit department is weak or unreliable, then this fact should be communicated in the external auditor's "report to management".