Reliance of independent public acountants on the work of the internal auditor;

              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
Auditors, 1957.
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