Syllabus D. Audit Evidence D6. The work of others

D6a/b/d. Why Rely on Experts? 1 / 3

Syllabus D6a/b/d)

a) Discuss why auditors rely on the work of others.
b) Discuss the extent to which external auditors are able to rely on the work of experts, including the work of internal audit.[
d) Explain the extent to which reference to the work of others can be made in audit reports.

ISA 620 deals with the use of the work of an expert by the auditor

The auditor may not have the expertise to make judgements on all aspects of a clients’ business and may seek help in the form of an expert.

Examples of this are specialist inventory, property valuation and complex work in progress.

Why rely on experts?

  1. Auditors do not have to be experts in everything

  2. Often it's effective and efficient to do so

  3. They need to where they lack the skills

How much to rely on experts?

Auditor needs to make judgements on:

  • Their Independence, Objectivity and Competence

    Is a member of a recognised professional body?
    How long has the expert been a member of the recognised body?
    How much experience does the expert have?

    Does the expert have any financial interest in the company?
    Does the expert have any personal relationship with any director in the company?
    Is the fee paid for the service reasonable and a fair, market based price?

  • This is based on their qualifications and their experience

  • If an expert in the inventory of the entity being audited is consulted on valuation of inventory, but works for a subsidiary of the entity then the auditor may consider them to be not sufficiently independent

Before any work is performed by the expert the auditor should agree in writing:

  1. Nature, scope and objectives

  2. Roles and responsibilities

  3. Nature of communication

  4. Confidentiality of expert

After the work - Auditor ensures it is appropriate

This means considering:

  • Consistency with other evidence

  • Any significant assumptions made

  • The accuracy of source data

No reference in the Audit Report

The auditor should make no reference to the use of the work of others in the audit report

It is the auditors’ opinion in the report and the work of others is simply one type of evidence that may be used, if sufficient and reliable, to come to that opinion