auditing in specialised industries

Question 1

specialised industry eg.

Answer 1

airline
banking and insurance
agriculture, and
oil extraction

Question 2

why are they called specialised industries

Answer 2

specific financial reporting standards
or
distinct accounting policies

eg.
IAS 41 agriculture for agriculture sector
IFRS 7 financial instruments: disclosure is imp for banking sector
valuation of oil in accordance with ias 2
valuation of apple trees- ias 16

Question 3

before accepting specialised audit:

Answer 3

assess competence
-ethical principles
-understanding of client’s business + regulatory requirements
-sufficient appt resources available and competence and capabilities

Question 4

larger vs audit firms

Answer 4

larger firm will likely meet competence requirement for almost any type of industry
-already have skill
or resources for training or bring in experts

smaller firms have to carefully consider

Question 5

how to prove competence has been considered

Answer 5

adequate documentation must
document that steps have been taken to improve competence where necessary for eg. thru staff training

Question 6

audit planning when auditing specialised industry

Answer 6

-obtain understanding
-likely to be firm guidance in form of publications
-guidance can be referred when planning the audit, esp when identifying ROMM
-consider industry specific risks (special transactions) as well as normal risks like depreciation, impairment of GW, provisions

Question 7

reliance on experts

Answer 7

-expert may be used to gather audit evidence
necessary when we lack expertise

we must comply with ISA of experts work
-standard addresses evaluating objectivity, competence and capabilities of expert
-define and communicate scope of experts work and assess their findings

Question 8

risk of using auditor’s work

Answer 8

-there is a risk of over reliance
-auditor cannot delegate all responsibility to expert
-ensure the expert’s findings align with our own understanding of the client and with other audit procedures.
-Any inconsistencies between the expert’s findings and other audit conclusions must be thoroughly investigated.

Question 9

TLDR

Answer 9

may be challenging
competence and supported staff
use experts but be careful
rewarding work for audit staff