Reliance of Independent Public Accountants on the Work of the Internal Auditor
by FRANK H. TIEDEMANN Partner, New York Office
Presented at educational seminar sponsored by the Philadelphia Chapters
of the Federal Government Accountants Association and the Pennsylvania Institute of Certified Public Accountants—October 1962
THE AUTHORITY for the public accountant to rely on the work of the internal auditor has been well established. Generally Accepted Auditing Standards, published by the American Institute of Certified Public Accountants, states that as part of the field work of the public accountant "there is to be a proper study and evaluation of the existing
internal control as a basis for reliance thereon and for the determination
of the resultant extent of the tests to which auditing procedures are to be restricted."
The standard short-form report rendered by the public accountant contains a scope paragraph stating that the "examination was made in accordance with generally accepted auditing stndards, and accordingly
included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances." In considering "the circumstances" surrounding an engagement the public accountant is particularly concerned with the system of internal control maintained by the client.
A good system of internal control embraces many types of controls,
all of which are important. Accounting controls, budgetary controls, fiscal controls, and production controls are all just as important
as internal auditing. However, internal audit is particularly important to the public accountant because it is devoted to policing the over-all system of internal control. Although the responsibility of the internal auditor extends beyond the policing of the system of internal control,1 it is this function that is of particular interest to the public accountant because his reliance on the system of internal control is directly affected by the effectiveness of the system of internal
audit in assuring him, as well as the company's management, that an effective system of internal control is being maintained consistently
in accordance with management's directives.
1 See Statement of Responsibilities of the Internal Auditor, Institute of Internal