USING THE WORK
OF OTHERS
TOPIC 9
Learning Objectives
◦To understand the following:-
❖ Using the work of other auditors (group audit)
❖ Using the work of expert
❖ Using the work of internal auditor
◦To appreciate the contribution by other experts in completing
the audit work
◦To consider the importance to include other experts’ work in
audit work
USING THE WORK OF OTHERS
Consideration to use the work of:
❖ISA 600: Using the Work of Another auditor –Group audit
❖ISA 610: Considering the Work of Internal Auditor
❖ISA 620: Using the Work of an Expert
An expert may be:-
❖Engaged by the entity
❖Engaged by the auditor
Using the work of an expert -Introduction
As auditor, there are time for certain assertions requires an expert opinion and
involvement.
For example:-
• Valuation of land and building (Chartered Valuer –Rahim & Co) or valuation of
work of arts
• Quantity surveyor geologist of granite stocks, underground mineral and
petroleum reserves
• Information security for a bank
• The measurement of work completed and to be completed on contracts is
progress (Engineers and Architect)
• Legal
Expert opinion
means concerning
a person interpretations
possess of agreement,
special skill, knowledge andstatus and regulations
experience in a
particular field other than accounting and auditing.
ISA 620:USING THE WORK OF AN EXPERT
• This International Standard on Auditing (ISA) deals
with the auditor’s responsibilities relating to the
work of an individual or organization in a field of
Scope : expertise other than accounting or auditing, when
that work is used to assist the auditor in obtaining
sufficient appropriate audit evidence.
Determining • If expertise in a field other than accounting or
the Need for auditing is necessary to obtain sufficient appropriate
an Auditor’s audit evidence, the auditor shall determine whether
to use the work of an auditor’s expert.
Expert
ISA 620:USING THE WORK OF AN
EXPERT
The objectives of the auditor are:
• (a) To determine whether to use the work of an
auditor’s expert; and
• (b) If using the work of an auditor’s expert, to
determine whether that work is adequate for the
auditor’s purposes.
Determining the Need for an Expert:
1.An expert may be needed to assist the auditor in one or more of
the following:
• Obtaining an understanding of the entity and its environment, including its
internal control.
• Identifying and assessing the risks of material misstatement.
• Determining and implementing overall responses to assessed risks at the
financial statement level.
• Designing and performing further audit procedures to respond to assessed
risks at the assertion level, comprising tests of controls or substantive
procedures.
• Evaluating the sufficiency and appropriateness of audit evidence obtained in
forming an opinion on the financial statements.
Determining the Need for an Expert:
2.The risks of material misstatement may increase when expertise
in a field other than accounting is needed for management to
prepare the financial statements, for example, because this may
indicate some complexity, or because management may not
possess knowledge of the field of expertise.
3.If the preparation of the financial statements involves the use of
expertise in a field other than accounting, the auditor, who is
skilled in accounting and auditing, may not possess the necessary
expertise to audit those financial statements
ISA 620:USING THE WORK OF AN EXPERT
–factors to be considered in using the expert’s
work
In determining the nature, timing and extent using the work of an auditor’s expert, auditor shall
consider matters including:
(a) The nature of the matter to which that expert’s work relates;
(b) The risks of material misstatement in the matter to which that expert’s work relates;
(c) The significance of that expert’s work in the context of the audit;
(d) The auditor’s knowledge of and experience with previous work performed by that expert;
and
(e) Whether that expert is subject to the auditor’s firm’s quality control policies and
procedures.
Using the work of an expert-Procedures(looking
whether the expert are can be relied)
Procedures to be performed/consideration by the
auditor:
• 1.To ensure that the expert is professional competent to take up
the engagement. (License, certificate, membership, experience and
reputation)
• 2.To assess the objectivity of the expert. The objectivity of the
expert will be impaired when the expert is employed by entity or
related to the company in other manner. In this case, auditor may
need to undertake additional audit procedures.
Using the work of an expert-Procedures
Procedures to be performed/consideration by the auditor:
• 3.The auditor need to consider:
• i. The objective of involving the work of an expert. For example it is unavoidable to
involve an expert to evaluate the amount of mineral underground, to account for as inventory figure.
• ii. The scope of work of the expert’s work. The expert may just to give auditor the
quantities of mineral underground but not for market value. So this case, auditor may need to seek
for another expert opinion on market value..
• iii. The assumption and method used by the expert. The auditor should have
some general knowledge about the assumption and method used. For example,
on valuation of land. The auditor may need to know the market value of the land surrounding the
area, to gauge the reasonable market value reported by the expert.
Using the work of an expert-Procedures
4.The auditor off course does not have the same expertise and
knowledge with the expert. However, based on knowledge and
experience should go for appropriateness and reasonableness of
assumption and method by the expert and figures reported.
5.Ultimately, the auditor should assess the appropriate of the
expert’s work as audit evidence regarding the financial statement
assertion being considered for a basis of opinion.
Using the work of an expert-Reporting Considerations
◦ If an expert does not provide sufficient audit evidence, the auditor still have
to resolve the matter.
◦ To resolve, the auditor may:-
❖ Discuss again with management and the expert
❖ Applying additional procedures including engaging another expert, if required
◦ If still cannot resolved, the auditor may modify the audit report:-
❖ Unqualified opinion with emphasis of matter/OMP (on the methodology adopted by
the expert is uncommon and the auditor is unable to make comparison on the results reported
by the expert); or
❖ Auditor may issued a qualified report (due to lack of audit evidence or disagreement).
Using the work internal auditors
Considerations to use the work of IA:
• Whether the planned nature and scope of the work of the
internal audit function that has been performed, or is
planned to be performed, is relevant to the overall audit
strategy and audit plan that the external auditor
• The external auditor has sole responsibility for the audit
opinion expressed, and that responsibility is not reduced
by the external auditor’s use of the work of the internal
audit
Using the work internal auditors
Examples of work of the internal audit function that can be used
by the external auditor include the following:
• Testing of the operating effectiveness of controls.
• Substantive procedures involving limited judgment.
• Observations of inventory counts.
• Tracing transactions through the information system relevant to financial
reporting.
• Testing of compliance with regulatory requirements.
Internal auditor does not substitute external auditor’s function
(or vice versa), they are complimenting each other.
End of Topic 9
