Question

International Standard on Auditing (ISA) 620 (Using the Work of an Expert) recognizes that an auditor may need to obtain evidence in the form of reports, opinions, valuations and/or statements from an expert.

Required

a) Briefly explain the factors that an auditor should take into consideration when deciding whether to use the work of an expert.

b) Explain whether an auditor who has relied on the work of an expert in his audit should make reference to the expert in the auditor’s report.

c) Explain the procedure you would take if management denied you the right to consult an expert

d) International Standard on Auditing (ISA) 580 (Management Representations) requires an auditor to obtain a letter of representation from management before issuing an audit report. Explain the importance of a letter of representation where the work of expert is relied on.

e) ISA 260 (Revised and Redrafted) Communication with those Charged with Governance deals with the auditor’s responsibility to communicate with those charged with governance in relation to an audit of financial statements. Explain four examples of matters that might be communicated to them by the auditor in the above case.

Answer 1

Ans: a : evaluate the competence, capabilities and objectivity of that expert

• obtain an understanding of the work of that expert

• evaluate the appropriateness of that expert’s work as audit evidence for the relevant assertion.

Ans b : With the permission of the expert, it may be appropriate to refer to the auditor’s expert in the auditor’s report. Conversely, unless there is a legal or regulatory requirement, there should not be any reference to the work of the auditor’s expert in an unmodified report.

Ans C: Management has no right to object use of Expert by Auditor. However Auditor shall look reasonableness of such objection and may apply alternate audit procedure to consider cost benefit analysis. However responsibility of opiniion is purely of Auditor.

Ans d: It is responsibility & right of an Auditor to take written representation from management & higher Authority I.e., TCWG, as applicable, to fix the responsibility that there are no material miss-statement is done by the management in preparation & presentation of financial statement of the company.

This is used as audit evidence for Auditor and it does not change anything when expert is used for Audit. that is it is of same improtance as before.

Ans e:

Auditor’s Responsibilities in Relation to the Financial Statement Audit

Planned Scope and Timing of the Audi

auditor’s views about significant qualitative aspects of the entity’s accounting practices, including accounting policies, accounting estimates and financial statement disclosures

Auditor Independence