INTERNATIONAL STANDARD ON AUDITING 620
USING THE WORK OF AN EXPERT
1. Introduction
The purpose of this International Standard on Auditing (ISA) is to establish
standards and provide guidance on using the work of an expert as audit
evidence.
When using the work performed by an expert, the auditor should obtain
sufficient appropriate audit evidence that such work is adequate for the
purposes of the audit.
“Expert” means a person or firm possessing special skill, knowledge and
experience in a particular field other than accounting and auditing.
The auditor’s education and experience enable the auditor to be knowledgeable
about business matters in general, but the auditor is not expected to have the
expertise of a person trained for or qualified to engage in the practice of
another profession or occupation, such as an actuary or engineer.
An expert may be:
Contracted by the entity;
Contracted by the auditor;
Employed by the entity; or
Employed by the auditor.
2. Determining the Need to Use the Work of an Expert
In obtaining an understanding of the entity and performing further procedures
in response to assessed risks, the auditor may need to obtain, in conjunction
with the entity or independently, audit evidence in the form of reports,
opinions, valuations and statements of an expert. Examples include the
following:
Valuations of certain types of assets, for example, land and buildings,
plant and machinery, works of art, and precious stones.
Determination of quantities or physical condition of assets, for example,
minerals stored in stockpiles, underground mineral and petroleum
reserves, and the remaining useful life of plant and machinery.
Legal opinions concerning interpretations of agreements, statutes and
regulations.
When determining the need to use the work of an expert, the auditor would
consider:
The engagement team’s knowledge and previous experience of the
matter being considered;
The risk of material misstatement based on the nature, complexity, and
materiality of the matter being considered; and
The quantity and quality of other audit evidence expected to be
obtained.
3. Competence and Objectivity of the Expert
When planning to use the work of an expert, the auditor should evaluate
the professional competence of the expert. This will involve considering the
expert’s:
Professional certification or licensing by, or membership in, an
appropriate professional body; and
Experience and reputation in the field in which the auditor is seeking
audit evidence.
The auditor should evaluate the objectivity of the expert.
The risk that an expert’s objectivity will be impaired increases when the expert
is:
Employed by the entity; or
Related in some other manner to the entity, for example, by being
financially dependent upon or having an investment in the entity.
4. Scope of the Expert’s Work
The auditor should obtain sufficient appropriate audit evidence that the
scope of the expert’s work is adequate for the purposes of the audit. Audit
evidence may be obtained through a review of the terms of reference which are often set
out in written instructions from the entity to the expert. Such
instructions to the expert may cover matters such as the following:
The objectives and scope of the expert’s work.
A general outline as to the specific matters the auditor expects the expert’s
report to cover.
The intended use by the auditor of the expert’s work, including the
possible communication to third parties of the expert’s identity and extent
of involvement.
The extent of the expert’s access to appropriate records and files.
Clarification of the expert’s relationship with the entity, if any.
Confidentiality of the entity’s information.
5. Evaluating the Work of the Expert
The auditor should evaluate the appropriateness of the expert’s work as
audit evidence regarding the assertion being considered. This will involve
evaluation of whether the substance of the expert’s findings is properly
reflected in the financial statements or supports the assertions, and
consideration of:
Source data used;
Assumptions and methods used and their consistency with prior periods;
and
Results of the expert’s work in the light of the auditor’s overall knowledge
of the business and of the results of other audit procedures.
When considering whether the expert has used source data which is
appropriate in the circumstances, the auditor would consider the following
procedures:
Making inquiries regarding any procedures undertaken by the expert to
establish whether the source data is relevant and reliable.
Reviewing or testing the data used by the expert
Assignment
Submitted to:
Miss Tahira anjum
Submitted by:
Mahnoor asif
Subject:
Auditing principle & techniques
Class:
B.com(hons.)
Roll no:
1410396
Date of submission:
20th may 2017
Govt.Post Graduate Islamia College (W) Cooper Road, Lahore
