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The proposals address comments received by the IAASB on its Exposure Draft (ED) on ISA 610, 'Using the Work of Internal Auditors'. The issues the IAASB considered included:
A number of respondents to that ED pointed out the perceived inconsistency between the independence requirements for external auditors under the Code and the use of internal auditors to perform external audit procedures.
“Through this Exposure Draft, the IESBA seeks to ascertain whether the proposed changes to the definition adequately clarify the term "engagement team" and eliminate the perception that the Code and the ISA are in conflict. The IESBA believes this will contribute to more consistent application of the Code, which is critical to our mission to support the global adoption and implementation of the Code of Ethics”, said Ken Dakdduk, chair of the IESBA.
During the development by the IAASB of the revised ISA 610, the IESBA considered whether individuals in the internal audit function providing direct assistance would be included within the definition of the engagement team, and therefore be required to be independent of the audit client. The IESBA concluded that such individuals do not meet the definition of a member of the engagement team because they are not partners or a member of the professional staff of the firm or network firm, nor are they engaged by the firm or network firm. Comments from several respondents to the IAASB exposure draft, however, indicated that there was uncertainty as to whether the definition would capture these individuals as part of the engagement team.
The IESBA proposes the following change to the definition of engagement team. It clarifies that individuals in an internal audit function providing direct assistance do not meet the definition of the engagement team under the Code. This should help to avoid any perceived incompatibility between the Code and the ISAs:
Engagement team—All partners and staff performing the engagement, and any individuals engaged by the firm or a network firm who perform assurance procedures on the engagement. This excludes external experts engaged by the firm or by a network firm. It also excludes individuals within an audit client‘s internal audit function providing direct assistance on the engagement in accordance with ISA 610 Using the Work of Internal Auditors.