Mpumalanga
Using the work of internal audit

Our reputation promise/mission
The Auditor-General of South Africa (AGSA) has a constitutional mandate and, as the Supreme
Audit Institution (SAI) of South Africa, it exists to strengthen our country’s democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence.

1. Objective
2. Legislative/Auditing Standard requirements
3. Relationship between the Internal Audit Function and the AGSA
4. Determining whether to use the work of the internal auditors
5. Determining to what extent to use the work of the internal auditors
6. Use specific work of the internal auditors
7. Drivers of internal controls
Using the work of internal audit

• To clarify what is meant when the
AGSA cannot use the work of the internal auditors.
• To clarify the extent to which the
AGSA and the Internal Audit Units can work together.
Using the work of internal audit

2. Legislative/Auditing Standard requirements
• Internal Audit Units are established and perform their functions in terms of sections 76(4)(d) and (e) of the PFMA, Treasury
Regulations 3.2 and 27.2, and sections 165(1)–(2) of the MFMA.
• The AGSA is required to consider/evaluate the adequacy of the work performed by the Internal Audit Unit for the purpose of our audits:
- International Standards on Auditing (ISA) 610: Using the work of internal auditors
- International Standards of Supreme Audit Institutions (ISSAI)
1610: Using the work of internal auditors.
Using the work of internal audit

3. Relationship between the
Internal Audit Unit and the AGSA
• The scope of the Internal Audit Unit determined by the
PFMA/MFMA(evaluate effectiveness of internal controls) and the external audit performed by the AGSA are different.
• Irrespective of the degree of autonomy and objectivity of the Internal Audit Unit, such function is not always independent of the entity, as is required of the AGSA.
• The AGSA responsibility is not reduced by the use of the work of this unit.
• The use of Internal audit work impact only the nature, timing and extent of our audit procedures
Using the work of internal audit

4 . Determining whether to use the work of the internal auditors
• The following criteria are taken into account to evaluate/consider adequacy of the work performed by the internal auditors:
- The objectivity of the internal audit unit,
- The technical competence of the internal auditors,
- Has the work been carried out with due professional care,
- The level of communication between the internal auditors and the AGSA.
Using the work of internal audit

4 . Determining whether to use the work of the internal auditors
• Different audit approach followed by external auditors:
– Combined approach (Combination of test of control and substantive test of details)
– Substantive test of details.
• Approach relevant to the use of the internal audit work – combined approach.
• Factors considered when determining the approach:
– Results from the System descriptions
– Findings highlighted on internal audit reports
– The scope of the control testing by the internal auditors
– Entity’s risk assessment and risk management strategy
– Assessment of the IT controls
– Etc.
Using the work of internal audit

5. Determining to what extent to use the work of the internal auditors
• The following criteria are taken into consideration when determining to what extent to use the work of the internal auditors:
- The nature and scope of the specific work performed by the internal auditors
- The risk assessment processes for each class of transactions, account balances and disclosure items.
- The degree of subjectivity
Using the work of internal audit

6. Using specific work of the internal auditors
• To use the specific work of the internal auditors, we evaluate and perform audit procedures on that work to determine adequacy.
• When evaluating the adequacy of the work we consider the following:
- Whether the work was supervised, reviewed and documented
- Sufficient, appropriate audit evidence was obtained to enable the internal auditors to draw reasonable conclusion
- Conclusions reached are appropriate in the circumstances and reports prepared are consistent with the results of the work performed
- Any exceptions or unusual matters disclosed by the internal auditors are properly resolved
Using the work of internal audit

7. Communication with those charged with governance
• Requirements of ISA 260 to be met.
• Improvement of control environment - Way forward?
Using the work of internal audit

Thank you!
Questions?
Using the work of internal audit