Using the Work of an Auditors Expert
ISA Implementation Support Module
Prepared by IAASB Staff October 2010
Overview
Introduction Significant Features of New Standard
Who is an Auditors Expert?
Need for an Auditors Expert
Managements Experts The Sliding Scale for Work Effort Competence, Capabilities and Objectivity Understanding the Auditors Experts Field Agreement with the Auditors Expert Adequacy of the Auditors Experts Work Reporting Implications
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Introduction
The context for revising ISA 620
Developments in financial reporting, such as wider use of fair value accounting, calling for more frequent use of experts Experts increasingly involved throughout entire audit process, not just with respect to substantive procedures regarding measurement of account balances Developments in related national standards and guidance
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Who is an Auditors Expert?
An individual or organization Expertise other than accounting or auditing
Auditors Expert
Internal or external to the firm
Assists the auditor in obtaining sufficient appropriate audit evidence
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Need for an Auditors Expert
Standard requires overriding question to be asked: Is an auditors expert needed for the engagement?
Risk may increase when other expertise is needed to prepare the financial statements
Engagement partner should be satisfied that engagement team collectively has appropriate competence and capabilities Keep the situation under review as the audit progresses circumstances may change
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Need for an Auditors Expert
Relevant considerations
Nature, significance and complexity of the matter Has management used an expert?
What are the related risks of material misstatement?
What sort of procedures are likely to be necessary?
An auditors expert not always needed in every case
In some cases, the auditor, although not an expert, may have enough understanding of a field to perform the audit without an auditors expert
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Managements Experts
Old ISA dealt with managements experts as well as auditors experts
Material on managements experts has been moved to ISA 500 because
Management, not the auditor, directs their work Managements experts can never be independent of management
The Sliding Scale for Work Effort
Nature, timing and extent of procedures with respect to an auditors expert will vary depending on circumstances such as
Nature of the matter Relevant risks of material misstatement
Significance of the experts work
The auditors knowledge and experience with previous work performed by the expert
Whether the auditors expert is subject to the firms quality control (QC) policies and procedures
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The Sliding Scale for Work Effort
Auditors internal experts are subject to the firms quality control policies and procedures
Partners and staff of the firm (including temporary staff)
Partners and staff of a network firm may also be subject to common QC
Reliance on firms QC may reduce extent of work needed on, e.g.:
Competence, capabilities and objectivity of the expert
Agreement with the expert
Evaluating adequacy of the experts work
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Evaluating Competence, Capabilities & Objectivity
Relevant considerations include
Is the auditors experts work subject to professional or industry requirements? Is the experts competence relevant to the matter at hand? Is any accounting or auditing competence expected in addition to competence in the experts particular field and, if so, does the expert possess that competence?
Do changing circumstances indicate a need to reconsider initial evaluation as the audit progresses?
Various sources of information may be used
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Objectivity
Independence required for internal, not external, auditors experts Objectivity required for all auditors experts Use threats and safeguards approach to evaluate objectivity
Are threats to objectivity, e.g., familiarity and selfreview, eliminated or reduced to an acceptable level by safeguards?
A number of procedures may be performed to evaluate objectivity
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Understanding the Auditors Experts Field
Understanding needs to be sufficient to determine nature, scope and objectives of the experts work and to evaluate the adequacy of that work for the auditors purposes
Understand relevant aspects of the experts field The auditor does not need to become expert in the field himself or herself
Sources of information similar to those when evaluating the experts competence, capabilities and objectivity
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Agreement with the Auditors Expert
Agreement is always needed
Nature, scope and objectives of the experts work Respective roles and responsibilities of the auditor and the expert Communication between the auditor and the expert Need for the expert to observe confidentiality requirements
Level of detail and formality of the agreement
Use a sliding scale approach
Agreement need not always be formally in writing
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Adequacy of the Auditors Experts Work
Evaluate for the auditors purposes
The experts findings or conclusions The experts assumptions and methods (when significant to the experts work) The source data used by the expert (when significant to the experts work)
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Reporting Implications
No reference to the auditors expert in unmodified auditors report
Unless required by law or regulation (mostly public sector) If required, indicate that the reference does not reduce the auditors responsibility
If reference is needed in relation to a modification
Indicate that the reference does not reduce the auditors responsibility
May need experts permission to make reference
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International Federation of Accountants
Copyright October 2010 by the International Federation of Accountants (IFAC). All rights reserved. Permission is granted to make copies of this work provided that such copies are for use in academic classrooms or for personal use and are not sold or disseminated and provided that each copy bears the following credit line: Copyright October 2010 by the International Federation of Accountants (IFAC). All rights reserved. Used with permission of IFAC. Contact [email protected] for permission to reproduce, store, or transmit this work. Otherwise, written permission from IFAC is required to reproduce, store, or transmit, or to make other similar uses of, this work, except as permitted by law. Contact [email protected]. ISBN: 978-1-60815-074-8 www.ifac.org
