The external auditor must determine whether it is likely to be adequate for the purposes of the audit:
So we look at:
Whether the internal audit staff are sufficiently independent to retain objectivity
The qualifications and technical competence of the internal audit staff
The professionalism of the staff and the standing of internal audit within the organisation
Are internal audit constrained in any way by management?
If these considerations are fulfilled the auditor may assess the reliability of the work carried out by internal audit by ensuring:
Internal audit working papers are well documented and have been reviewed
Evidence gained by internal audit is sufficient and appropriate
Any conclusions drawn are reasonable and valid
Management have acted on recommendations made by internal audit
If all of the above is satisfied the auditor may choose to place reliance on some of the work of internal audit.
Remember that although they may use some of the work of internal audit as evidence, the responsibility for the final opinion will always lie with the external auditor.