Using the Work of a Specialist Flashcards
AICPA Guidance—The relevant AICPA guidance is provided by AU 620, Using the Work of an Auditor’s Specialist. This pronouncement states that the auditor’s objectives are to determine:
1) whether to use the work of an auditor’s specialist; and
2) whether the work of the auditor’s specialist is adequate for the auditor’s purposes.
Auditor’s Specialist
An individual or organization 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.
Competence, Capabilities, and Objectivity of the Specialist
The auditor should evaluate the competence, capabilities, and objectivity of the auditor’s specialist for the auditor’s purposes.
Obtaining an Understanding of the Field of Expertise
The auditor should obtain a sufficient understanding of the field of expertise of the auditor’s specialist so that the auditor can
1) Determine the nature, scope, and objectives of the work; and
2) Evaluate the adequacy of that work for the auditor’s purposes.
Agreement with the Auditor’s Specialist
The auditor and the auditor’s specialist should agree (in writing when appropriate) about the following:
1) The nature, scope, and objectives of the work involved;
2) Their respective roles and responsibilities;
3) The nature, timing, and extent of communications between the auditor and the auditor’s specialist, including any reports to be delivered; and
4) The requirements for the auditor’s specialist to adhere to confidentiality considerations applicable to an audit engagement. The agreement between the auditor and the external specialist is usually in the form of an engagement letter.
Evaluating the Adequacy of the Work
1) The auditor should evaluate the adequacy of the work performed by the auditor’s specialist, including the following matters:
1) The relevance and reasonableness of the conclusions;
2) The relevance and reasonableness of any underlying assumptions and the methods used; and
3) The relevance, completeness, and accuracy of any source data used by the auditor’s specialist.
Evaluating the Adequacy of the Work
2) The auditor may perform specific procedures to evaluate such work, including:
1) Making inquiries of the specialist;
2) Reviewing the specialist’s working papers; and
3) Performing certain corroborative procedures, such as performing analytical procedures, examining published data, or confirming some matters with third parties, among other possibilities.
If the Work is not Adequate
The auditor and the auditor’s specialist should agree on any further work to be performed, or the auditor should perform additional audit procedures that are appropriate to the circumstances (which could include engaging another auditor’s specialist). If the auditor is unable to resolve the matter, it could constitute a scope limitation that would result in a modified opinion.
Reference to the Auditor’s Specialist in the Auditor’s Report
1) If the auditor’s report contains an unmodified opinion, the auditor should not refer to the work of an auditor’s specialist.
2) If the auditor’s report contains a modified opinion and the auditor believes that it would help readers understand the reason for the modification, the auditor may reference the work of an external auditor’s specialist. Normally, such a reference would first require the permission of the auditor’s specialist. The auditor should also point out, in the auditor’s report, that such a reference does not reduce the auditor’s responsibility for the expressed opinion.
An auditor intends to use the work of an actuary who has a relationship with the client. Under these circumstances, the auditor
The auditor is required to gain an understanding of the relationship and assess the risk that the actuary’s objectivity might be impaired.
An auditor who uses the work of a specialist may refer to the specialist in the auditor’s report if the
AICPA Professional Standards indicate that reference to the work of a specialist may be made in the auditor’s report if the auditor believes such reference will facilitate an understanding of the reason for a MODIFIED opinion.
