Ellchart Business School
AUDIT EVIDENCE
USING THE WORK OF
OTHERS
TARGET LEARNING OUTCOMES
▪ Understand the need to make use of the work of others in
performing an audit;
▪ Explain key considerations before making use of the work of
others.
▪ Identify other experts whose work is relevant to an audit of
financial statements
▪ Describe the procedures to be performed before placing
reliance on the work of others.
▪ Initial audit engagements and audit procedures on opening
balances
STUDY MATERIALS
1. ISA 500: Audit Evidence
2. ISA 610: Using the work of internal
auditors;
3. ISA 620: Using the work of an auditor's
expert
BACKGROUND
In order to obtain sufficient and appropriate audit
evidence in the most efficient and effective manner, the
auditor may need to rely on the work of the following:
a) Management’s expert;
b) Internal Auditors
c) Auditor’s expert
WHO IS MANAGEMENT EXPERT?
Who is a management expert? - ISA 500 par 5(e):
❖An individual/organisation possessing :
❖Expertise in a non-accounting/auditing field
❖Whose work has been used by management in
the preparation of FS;
WHAT SHOULD WE CONSIDER BEFORE RELYING ON THE
WORK OF THE MANAGEMENT EXPERT?
Evaluate competencies, capabilities and objectivity - par 8 (a)
Para A48-A54
❖ Is the expert competent?
❖ Is the expert capable?
❖ Is the expert objective?
UNDERSTANDING THE WORK OF THE MANAGEMENT EXPERT
Obtain an understanding of the work of the expert – par 8(b) A55- A58;
❖ What should the auditor look at?
❖Understand relevant field of expertise;
❖Evaluate the engagement letter agreed upon by the expert and
management
❖Professional standing of the expert
❖Client references
❖Assumptions used by expert.
WHAT SHOULD WE CONSIDER BEFORE RELYING ON THE
WORK OF THE MANAGEMENT EXPERT?
❖Evaluate the appropriateness of the expert’s work – par 8(c)
❖How should the auditor assess this?
❖Assess relevance and reasonableness of findings and conclusions;
❖Assess relevance and reasonableness of assumptions and methods used;
❖Assess relevance, completeness and accuracy of source data used.
Using the work of internal auditors(ISA 610)
Key factors to consider before placing reliance: (ISA
610.15)
a) Organizational status and objectivity of the internal
audit function;
b) The technical competence of internal audit staff;
c) Whether the internal audit function exercises due
professional care and conduct in performing their
work;
d) Assess the work performed by the internal auditors.
Using the work of an Auditor's expert
Who is an auditor expert? - ISA 620 par 6(a)
An individual(internal or external)/organisation;
Expertise in a non-accounting/auditing field
Whose work has been used by the auditor
In gathering sufficient appropriate audit evidence
WHAT SHOULD WE CONSIDER BEFORE RELYING ON THE
WORK OF THE AUDITOR EXPERT?
❖Evaluate competencies, capabilities and
objectivity
❖Is the expert competent?
❖Is the expert capable?
❖Is the expert objective?
WHAT SHOULD WE CONSIDER BEFORE RELYING ON THE
WORK OF THE MANAGEMENT EXPERT?
❖Obtain an understanding of the work of the expert
❖ What should the auditor look at?
❖Understand relevant field of expertise;
❖Consult with the expert before appointment
WHAT SHOULD WE CONSIDER BEFORE RELYING ON THE
WORK OF THE MANAGEMENT EXPERT?
Evaluate the appropriateness of the expert’s work
❖Assess relevance and reasonableness of findings and conclusions;
❖Assess relevance and reasonableness of assumptions and methods
used;
❖Assess relevance, completeness and accuracy of source data used.
TYPICAL EXAM SCENARIO
You are a second-year trainee at A&E chartered accounts, which currently auditing
ZIMRA. The Internal audit function of Zimra consists of 2 members :the CAE and a
student on attachment, audits are normally skipped due to capacity constraints.
Zimra recognized a right of use asset and lease liability in respect of office blocks it
uses for administration purposes in different town outside Harare. Zimra, consulted
Ellchart Advisory to draft the accounting policy for lease properties and to advise
on the accurate accounting treatment of the same.
Advise the engagement partner of A&E on what to consider before placing reliance on the internal audit
function at Zimra as well as the work around accounting treatment of Admin Offices in various towns used
by Zimra. ( 12 marks)
THREATS TO THE FUNDAMENTAL PRINCPLES
