Your firm has been external auditor of Elgol plc for some years. Elgol has an internal audit department engaged in both compliance and operational auditing.

You have a high opinion of the quality of internal audit work and have established a good relationship with John MacLean, the head of internal audit. He has asked you to give a talk to the members of his department during their annual training week.

He would like your views on the different roles of external and internal auditors, the type of work that each carries out and their reporting responsibilities.

Required:

(a) Draft the lecture notes that you will use when giving your talk, paying particular attention to the differences and similarities of the following features of external and internal auditors:
(i) general role (ii) independence (iii) the work carried out on systems of internal control and operations (iv) reporting responsibilities.

(b) Explain what evidence you would seek as external auditor to satisfy yourself that you can rely on the work of the internal auditors.

(c) Give three examples of internal audit activity that might be used by the external auditor.