Question

Organizations will often hire a specialist to determine the value of the tangible and intangible assets obtained in an acquisition. Does the auditor always need to engage his or her own specialist to test the work of the specialist hired by the organization? Explain, incorporating the idea of the importance of auditor professional skepticism into your response.

Answer 1

ISA 620, Using the Work of an Auditor’s Expert defines an auditor’s expert as: ‘An individual or organisation possessing expertise in a field other than accounting or auditing, whose work in that field is used by the auditor to assist the auditor in obtaining sufficient appropriate audit evidence. An auditor’s expert may be either an auditor’s internal expert (who is a partner or staff, including temporary staff, of the auditor’s firm or a network firm), or an auditor’s external expert.’ Auditors are experts in accounting and auditing matters, but they are not reasonably expected to be experts in any other field. However, candidates should appreciate that, in certain situations, auditors do need to employ their own expert in order to decrease the risk that material misstatement will not be detected.

An auditor’s expert needs to be competent, capable and objective if their services are to be deemed adequate for the audit purpose. Let’s deal with each of these attributes. • Competence – relates to the nature and level of expertise of the expert. Clearly, any expert employed should have widespread recognition of their expertise in the stated discipline. • Capability – relates to the expert’s ability to exercise that competence in the circumstance of the audit engagement. For example, the expert must have the time and resources available to perform the task in hand. • Objectivity – relates to the possible effects that bias, conflict of interest or the influence of others may have on the judgment of the expert. If an expert has a vested interest in expressing anything other than objective opinion with regard to the subject matter, then their opinion will be of no value to the auditor.  

When evaluating the findings and conclusions of the auditor’s expert for audit purposes, the auditor may carry out various procedures, including: • inquiries of the auditor’s expert • reviewing the auditor’s expert’s working papers and reports • corroborative procedures such as: - observing the auditor’s expert’s work - examining reputable statistical reports and other authoritative published data - confirming relevant matters with third parties - performing detailed analytical procedures, and - reperforming calculations • discussion with another expert with relevant expertise • discussing the auditor’s expert’s report with management. If the auditor concludes that the work of the auditor’s expert is not adequate for the auditor’s purpose and the auditor cannot resolve the matter – by either agreeing that the expert should carry out further work or by the auditor carrying out additional audit procedures as appropriate. 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.