If Internal Audit report is carried out fairly it becomes very crucial document for Statutory Auditors, The statutory auditor may use internal audit report in a meaningful manner and can perform his duties in a better way. Which can help to perform Statutory Auditor’s while performing their Final Audit. Internal Audit report is a very important documents and it contains various information cum insights about the company’s/entity’s operations. Generally an internal audit report contains:
a. Major irregularities observed in the areas audited
b. Identification of the Scope of improvement in the audited area
c. The comments on company existing policies about the area audited
d. The follow up of earlier audit observations
It gives a clue whether the entity has been functioning as per established system and procedures. Since the scope of internal audit is defined by management, it may contain various insights which are usually not identified by other professional. The use of internal audit report in carrying out statutory audit may give an edge to the statutory auditor in carrying out his professional responsibility. Now here the question arises whether the internal audit report may be accessible by the statutory auditors and whether the statutory auditor may refer the report of internal auditor in his report. Now we will analyze these two questions for proceeding further.
Whether an internal Audit report is a document accessible by the Statutory Auditors?
Internal Audit report is not a public document and it is not freely accessible by public in general as it contains information which may be misused. Internal Audit report should be freely accessible to the statutory auditor as he is supposed to comment on the system of internal audit in the company.
Whether an Internal Audit report may be referred in statutory audit report?
Since a statutory auditor is duty bound to comment on the robustness of the internal audit system in an organization, he may refer the internal audit system and refer that an internal audit system exist in the entity.
For reviewing the work of an Internal Auditor, the statutory auditor may refer the internal audit report. The review of internal audit report helps the statutory auditor in finalizing the extent of audit and auditing techniques. If the statutory auditor finds that there is a robust internal audit system is in place, he may reduce the extent of audit.
Importance of Internal Audit report for the Statutory Auditors
Internal audit report is a document which gives various insights about a business. The statutory auditor may use the internal audit report in different manner viz
a. To evaluate the organization status of Internal Auditor:
The internal audit report gives an insight about the organization status of internal audit report which may help the statutory auditor in determining the organization status of internal audit and effectiveness of internal audit
b. To decide the extent of audit
Internal audit report may provide the effectiveness of various systems in the organisation which may further helps him in determining the extent of audit required for the systems. Generally, the external auditor is interested in the results of such audit work only when it has an important bearing on the reliability of the financial records. The review of internal audit report provides him such insights.
c. To decide about the effectiveness of internal audit and internal control systems
The internal audit report generally contains various insights about the Internal Check and Internal Control system in an organization. After analyzing the internal audit observation and management feedback, the statutory auditor may very well evaluate the effectiveness of both systems in an organization
To Sum up, we may say that internal audit report is a very important reference document for the statutory auditor. A statutory auditor should carry out the review of internal audit report effectively so as to make the statutory audit work easy.