On pages 1307 1311 there is a survey of both internal auditors and external auditors about the perceptions of the relationship of partnering in the audit process.

QUESTION: DO NOT REITERATE the conclusions of the authors. Instead, please look at the results of the survey, list at least five of your perceptions and explain why you came to this conclusion.

LIST AT LEASE 5 PERCEPTIONS OF THE SURVEY RESULTS AND EXPLAIN WHY YOU CAME TO THIS CONCLUSION.

Chapter 29: Relationships with External Auditors 1307 The audit staff is not flexible so as to accommodate emergency situations. Potential turnover of external audit staff with extensions of the learning curve for new auditors. Lack of familiarity with the organization. The internal-external audit relationships are important primarily in the third variation of the operation, the cosourcing where the internal auditing is still a requirement of a chief audit executive and his or her staff. There are a series of aspects that should be considered. For example: An engagement letter outlining responsibilities. Lines of control and authority. Structure and expertise of the external staff. Relationships with the external audit staff. Handling of classified information. Methods of reporting. Aspects of client relationships. Handling of findings that have a material external audit significance. Quality of staff and tenure. The use of risk assessment and its relationship to client management, Mandatory and self designated audits and the use of cyclical audit schedules. Methods of achieving independence: - From external audit organization. - From client. From management influences. Methods of evaluation of the outsourcing operation There are probably more aspects that could be identified for internal audit consideration. There should be a designated high-level internal audit official responsible for the monitoring of the cosourcing operation. Deviations should be immediately brought to the attention of the chief audit executive, and in extreme cases, to the attention of senior management and the audit committee. Coordinating Total Audit Coverage A recent (1998) survey of the relationships between internal and external auditors, sponsored by The Institute of Internal Auditors Research Foundation showed that perceptions of internal and external auditors as to the relationship ranges from one where there is complete coexistence to one where there is partnering." This arrangement is understandable. However, the opinions of the respondecs to all tour identified classifications tend to disclose a 1308 Part 7: Other Matters Relating to Internal Auditing preponderance toward "coordination. The positions of the 114 internal auditors and 113 external auditors who responded were distributed as follows: Internal Auditors External Auditors Coexistence Coordination Integration Partnering 18.4% 62.3 8.8 10.5 100.0% 4.4% 69.0 15.0 11.5 99.9% There tended to be agreement between both groups that there was "coordination. Also, reasonable agreement exists that there was "partnering." The interesting disclosure was that 21 internal auditors compared to five external auditors classified the relationship as "coexistence." Also, in contrast, that 10 internal auditors compared to 17 external auditors classified the relationship as "integrated." o the current conditions, there seemed to be agreement that coordination has been moderate, that it was contributing to some degree to total audit coverage, and that it was significantly effective in minimizing duplicate efforts. As to the aspects of coordination, the survey also explored the frequency of annual formal and informal meetings, scheduling and planning activities, access to reports and working papers, understanding of external audit operations, training activities, and appraisal activities Formal meetings: Internal auditors External auditors 4.58 meetings 7.22 meetings This difference could be a lack of clarity as to the formality" of the meeting. The point is that there were at least four, almost five, formal meetings each year. Informal meetings Internal Auditors External Auditors Daily Weekly Monthly Quarterly Less frequently than quarterly Chapter 29: Relationships with External Auditors 1309 This pattem replicates that of the formal meetings in that the external auditors observed that coordination was effected on a much more frequent basis, than did the internal auditors. There could be some confusion as to the definition of "informal meetings. Scheduling and Planning Internal Auditors External Auditors .94 1.14 .89 1.33 1.40 .89 Work together in scheduling audit work Coordination is ongoing throughout the year Work together in planning audit coverage A coordinated audit plan is used to assess total audit effort A coordinated plan is developed jointly .63 20 .80 .34 Scale: 2: strongly agree; 1: slightly agree; 0: neither The fact that all of the above are positive is an indication that there is coordination in planning and scheduling. There is some disagreement as to how continuously the coordination is effected. Access to Reports and Working Papers Internal Auditors External Auditors 1.76 1.39 Working papers access Internal auditors' working papers to external auditors External auditors' working papers to internal auditors Report access Internal auditors' report to external auditors External auditors' report to internal auditors 1.96 1.88 Scale: 2: strongly agree; 1: slightly agree; 0: neither 1310 Part 7: Other Matters Relating to Internal Auditing Agreement appears on both sides that there should be reasonably free access. The interesting aspect is the large degree of favor on the part of external auditors in providing their working papers as well as their reports and management letters to the internal auditors. The authors of the survey propose that this sharing of working papers and reports can result in a better total audit effort. Understanding of External Audit Activities Internal Auditors External Auditors 1.25 Internal auditors understand the level of materiality used by external auditors Internal auditors understand the nature and extent of external audit procedures 1.23 Scale: 2: strongly agree; 1: slightly agree; 0: neither The results of this comparison tend to conflict with the results of the previous comparison on access to working papers and reports. Also, there is a substantial gap between the perceptions of the two groups of auditors. This seems to be an area where further communication could bear important results. Training Activities Internal Auditors External Auditors --61 Internal auditors participate in training activities of external auditors External auditors participate in training activities of internal auditors -33 -61 -45 Scale: 2: strongly agree; 1: slightly agree; 0: neither; -1: slightly disagree; -2: strongly disagree The results of this query are that there is little (but some) mutual participation in training activities. This may be a reasonable approach as the objectives and methodology of the two organizations have significant differences. Chapter 29: Relationships with External Auditors 1311 Internal Auditors External Auditors Appraisal Activities -21 -33 External auditors formally appraise the effectiveness of internal auditors Internal auditors formally appraise the effectiveness of external auditors External auditors informally appraise the effectiveness of internal auditors Internal auditors informally appraise the effectiveness of external auditors .94 Scale: 2: strongly agree; 1: slightly agree; 0: neither; -1: slightly disagree; -2: strongly disagree The results of this comparison are that although there is some formal evaluations of the others' effectiveness, there tends to be much more informal evaluations and appraisals. It is interesting to note that external auditors may not be aware of the internal auditors formal evaluations of their work. Both groups tend to favor the informal appraisals that seem to be somewhat common. The Bridge Trust must be a keystone of the cooperative bridge. Neither should try any tricks on the other. Neither should be ashamed or reluctant to admit to not having been especially clever in the way they handled a particular task. With the feeling of mutual respect and trust, they can soundly construct that all-important bridge. Here are some of the building blocks that can help make it strong: Awareness of each other's plans requires close coordination at the very outset, but the internal auditor must accept the fact of some surprises. External auditors must have the right to keep some audit features to themselves until they are ready to carry them out. If both are aware of each other's understanding of this prerogative, such surprises should not be fatal to a wholesome relationship. External auditors should be kept informed of any conditions that may affect the qualifications, independence, and competence of the internal audit staff. The client's system of internal controls is the foundation on which all independent audits are built. The external auditors must be absolutely certain they have reliable, unbiased information about the system. Hence, it has been suggested that the internal auditors fill out the independent auditor's control questionnaires. The internal auditors