The FRC has confirmed it will adopt the proposed international improvements to the auditing standards on the external auditor using the work of internal audit.

Subject to consulting on the timing of implementation, the changes will rule out the direct use of internal audit staff as members of audit engagement teams, with the aim of preserving auditor independence.

The improvements reflect changes to the IAASB's International Standards on Auditing, which was intended to:

• enable better use, in making the external auditor's risk assessments, of the knowledge and findings of the internal audit function;
• strengthen the external auditor's evaluation of the work of the internal audit function in obtaining audit evidence; and
• resolve the ambiguity as to whether the ISAs permit the use of internal audit staff as members of the external audit engagement team to perform audit procedures (referred to as 'direct assistance').

The FRC Board has decided that, because using internal audit staff as members of the audit engagement team is contrary to the principle of independence, this should no longer be permitted. This was also the advice of the Audit and Assurance Council.

Nick Land, FRC board member and chairman of the Audit and Assurance Council, said: 'Direct assistance involves some of the audit being undertaken by individuals that are not independent of the audited entity. Shareholders generally expect that external auditors should be seen to be free from threats to their independence.

'Permitting the direct use of internal auditors involves agreeing lower independence standards for some members of the audit engagement team, which leans against this expectation. Accordingly, the FRC has concluded that this should no longer be allowed.'

The consultation on timing of implementation will remain open for a period of two months to 9 April 2013.