Big4Guy

Under Sarbanes Oxley an auditor must test the operating effectiveness of internal controls over financial reporting to form an opinion on financial statements. Primarily the auditor should use the results of his own testing in forming such opinion. This means that the tests of operational effectiveness conducted by the auditor will form the basis of the auditor's opinion. However, SOX allows auditors to use the work of others to alter the nature, timing and extent of procedures performed independently.

So what does "Work of Others" means here. For SOX purposes, work of others means work perfomed by company's internal auditors, consultants, other company personnel, and third parties working under the direction of the management or audit committees. In using the work of others, auditors must take into consideration the following:

1) Evaluate the nature of controls subject to the work of others.
2) Evaluate the competency and objectivity of the individuals who performed the work.
3) Test some of the work performed by others to evaluate the quality and effectiveness of their work.

However, firstly, an auditor cannot use the work performed by others for controls that form part of the control environment including controls specifically established to prevent and detect fraud and secondly in
performing walkthroughs.

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