QUESTIONS AND ANSWERS Auditing Help

State the difference between management’s expert and auditor’s expert

Management uses the work of management’s expert to assist in preparing financial statements. Auditor uses the work of auditor’s expert to obtain sufficient and appropriate audit evidence. Give some examples where the auditor needs assistance of an expert.

Rejer to para 2 of the text

Describe auditor’s duties as regards using the work of auditor’s expert nswer-3 Assess competence and objectivity of auditor’s expert
(a) Discussions with expert
(b) Past experience with expert
(c) Expert’s membership of a professional body
(d) Audit firm’s quality control policies
(e) Areas of speciality within the expert’s field
(f) Financial knowledge of auditor’s expert
(g) Threats to objectivity’, f0!. example, financial interests, close family relationship, business, provision for other services.

Using the Work of an Auditor’s Expert

2. Agree on the following matters
(a) Objective and scope of the auditor’s expert’s work including relevant performance standards, assumptions and methods to be uses.
(b) Responsibility of auditor and expert, including the review of the expert’s work, access to entity’s records, performance of work with due care and diligence.
(c) Methods and frequency of communication and reporting including dead lines, potential reservations and restrictions by entity on access to records and files. (d) Confidentiality requirements.
3. Evaluate the adequacy of the auditor’s expert’s work (a) Review auditor’s expert’s working papers (b) Observe auditor’s expert’s work
(c) Carry out check on arithmetical accuracy
(d) See whether conclusions of the auditor’s expert are reasonable in the circumstances:

Clear expression of opinion

Opinion relates to appropriate period

opinion takes into account subsequent events Ally reservations?
(e) Discuss auditor’s expert’s report with management
(f) Discuss auditor’s expert’s report with another expert
(g) Obtain understanding of the assumptions made and methods used:
Consistent with generally accepted practices within the field of the auditor’s expert Consistent wits the requirements of relevant IFRS?

Conststent with those used by management, and if different, reasons for the difference.

Source data used by auditor’s expert:
Controls over transmission of data to expert Completeness and internal consistency Has the auditor’s expert tested the reliability of source data?

What will be the impact on auditor’s report if:
(a) Auditor is unable to evaluate the auditor’s expert work
(b) Auditor is satisfied with the auditor’s expert work?

(a) If the auditor is unable to evaluate the auditor’s expert work it is scope limitation and the report will be appropriately modified.
(b) The auditor should not refer to the work of auditor’s expert in unmodified report. Such a reference might be misunderstood to be a qualification of the auditor’s opinion, or a division of responsibility, neither of which in intended.

What will be the impact on auditor’s report if:

(a) Auditor is unable to evaluate the auditor’s expert work
(b) Auditor is satisfied with the auditor’s expert work

(a) If the auditor is unable to evaluate the auditor’s expert work it is scope limitation and the report will be appropriately modified.
(b) The auditor should not refer to the work of auditor’s expert in unmodified report. Such a reference might be misunderstood to be a qualification of the auditor’s opinion, or a division of responsibility, neither of which in intended.

The management has disclosed a contingent liability of Rs. 20 million against a pending law suit. The contingency is based on the opinion of a lawyer. What documents will you inspect to verify the contingency?

(a) Letter written by the entity to the lawyer
(b) Scope of the work
(c) The use to be made of lawyer’s work
(d) Assumptions used by the lawyer
(e) Contentions of the management
(f) Degree of estimation in the amount of contingency :
(g) Probability of out-flow of economic resources

In an unmodified audit report following paragraph is included:
“So far as the valuation of land and building is concerned we have relied on the work of AB & Co, independent professional valuers”.
Comment on the above.

Information regarding the competence, capabilities and objectivity of an auditor’s expert may come from a variety of sources, such as:
(a) Personal experience with previous work of that expert.
(b) Discussions with that expert.
(c) Discussions with other auditors or others who are familiar with that expert’s work.
(d) Knowledge of the expert’s qualifications, membership of a professional body or industry association, license to practice or other forms of external recognition.
(e) Published papers or books written by that expert.
(f) The auditor’s firm’s quality control policies and procedures.

When expertise in a field other than accounting or auditing is necessary to obtain sufficient appropriate audit evidence, the auditor has to determine whether to use the work of an auditor’s expert.

Required

List down the sources from where the auditor may get the information regarding the expert’s competence, capabilities and objectivity of an auditor’s expert may come from a variety of sources, such as:
(a) Personal experience with previous work of that expert.
(b) Discussions with that expert.
(c) Discussions with other auditors or others who are familiar with that expert’s work.
(d) Knowledge of the expert’s qualifications, membership of a professional body or industry association, license to practice or other forms of external recognition.
(e) Published papers or books written by that expert.
(f) The auditor’s firm’s quality control policies and procedures.

Posted on November 2, 2015 in Using The Work of an Auditor's Expert

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