Increasing External Auditor Reliance on Internal Audit

This guide outlines the factors impacting external auditor reliance on the work of internal auditors, particularly in the context of the Sarbanes-Oxley Act (SOX). It explains how the Public Company Accounting Oversight Board (PCAOB) allows external auditors to utilize internal audit work, emphasizing the importance of competence, objectivity, scope of work, assessed risk of material misstatement, and quality of the internal audit function. The document details how these factors influence external auditors' decisions and the benefits of increasing reliance on internal auditors, such as reduced compliance costs and enhanced operational efficiency. It also discusses the action plans companies can implement to foster better collaboration between external and internal auditors, including the use of technology and sustainable processes. The guide concludes by summarizing the significance of these relationships in achieving effective financial reporting and compliance with SOX requirements.