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 Introduction to SA 620 Using the Work of an Auditor’s Expert

Particulars

Details

Scope Auditor’s responsibilities in relation to the use of an expertise work (individual or organization) other than accounting or auditing which will assist in obtaining sufficient audit evidence
Non – Applicable 1. Use of expertise who is specialized in an area of accounting or auditing per SA 220

2. Expertise work in a field which is used by the entity for preparing financial statements (Management’s expert) per SA 500

Effective Date Audit of financial statements for periods beginning on or after 1st April 2010
Auditor’s Objective 1. Determine whether to use the work of an auditor’s expert

2. If yes, determine if that work is adequate for auditor’s purpose

Auditor’s Responsibility Solely responsible for the audit opinion expressed which is not reduced by the auditor’s use of the work of an expert. But subject to SA 620, the auditor may accept the expert’s finding and conclusion as an appropriate audit evidence
Need for Expert To obtain sufficient appropriate audit evidence, if expertise in a field other than accounting or auditing is required

1. Definitions

I. Auditor’s Expert – “An individual or organization possessing expertise in a field other than accounting or auditing, whose work in that field is used by the auditor to assist the auditor in obtaining sufficient appropriate audit evidence. An auditor’s expert may be the auditor’s internal expert or an external expert.

II. Management Expert – “An individual or organization possessing expertise in a field other than accounting or auditing, whose work in that field is used by the entity to assist the entity in preparing the financial statements. 

2. Nature, Timing, and Extent of Audit Procedures

To determine the nature, timing, and extent of audit procedures related to expert’s work, the following matters are to be considered by the auditor:

i. Nature of the subject

ii. Risk of material misstatement

iii. The significance of expert work to the audit

iv. Auditor’s knowledge of and experience with the expert’s work

v. If the expert is subject to the auditor’s firm quality control policies & procedures

3. Some of the requirements related to auditor’s expert work

Particulars

Details

Competence, Capabilities and Objectivity Auditor should evaluate the expert’s competence, capabilities, and objectivity for the auditor’s purpose. W.r.t external expert, an inquiry regarding interest and relationships that may create a threat to that expert’s objectivity should be made
Understanding of the Field of Expertise Auditor should obtain sufficient understanding of the following:

i. Nature, scope, and objectives of expert’s work

ii. Evaluate the adequacy of expert work for audit purpose

Agreement with expert work Auditor should agree in writing the following:

i. Nature, scope, and objectives of the expert work

ii. Respective roles and responsibility

iii. Nature, timing, and communication between the auditor and expert

iv. The form of the report to be provided by expert

v. Need for the expert to observe confidentiality requirements

Adequacy of expert work Auditor should evaluate the adequacy including:

i. Relevance and reasonableness of the expert finding or conclusion

ii. Consistency with other audit evidence

iii. Relevance and reasonableness of any significant assumptions or methods used

iv. Accuracy, completeness, and relevance of source data if any used

Inadequate expert work If Auditor is of the opinion that expert’ work is not adequate, then:

i. Determine the nature and extent of further work to be performed by the expert

ii. Perform further audit procedures appropriate to the situation

4. Reference to the Auditor’s Expert in the Auditor’s Report

Reference to the auditor’s expert work should not be made in an auditor’s report containing an unmodified opinion unless required by law or regulation. If such reference is-

i. Required by law or regulation or

ii. Relevant to an understanding of a modification to the auditor’s opinion, then

The auditor should indicate in the auditor’s report that the references do not reduce the auditor’s responsibility for the audit opinion

5. Example of Auditor’s Expert work

I. Valuation of complex financial instruments, land & buildings, machinery, intangible assets, impaired assets etc

II. Estimation of oil and gas reserves, actuarial calculation of liabilities etc

III. Valuation of environmental liabilities, site clean-up cost,

IV. Interpretation of law, contracts, and regulation

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