Guide to Using International Standards on Auditing in - IFAC

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198 <strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts Paragraph # Relevant Extracts from ISAs 620.6 For purposes of the ISAs, the following terms have the meanings attributed below: (a) Audi<strong>to</strong>r’s expert—An individual or organization possessing expertise in a field other than accounting or auditing, whose work in that field is used by the audi<strong>to</strong>r <strong>to</strong> assist the audi<strong>to</strong>r in obtaining sufficient appropriate audit evidence. An audi<strong>to</strong>r’s expert may be either an audi<strong>to</strong>r’s internal expert (who is a partner or staff, including temporary staff, of the audi<strong>to</strong>r’s firm or a network firm), or an audi<strong>to</strong>r’s external expert. (Ref: Para. A1-A3) (b) Expertise—Skills, knowledge and experience in a particular field. (c) Management’s expert—An individual or organization possessing expertise in a field other than accounting or auditing, whose work in that field is used by the entity <strong>to</strong> assist the entity in preparing the financial statements In some situations, the audi<strong>to</strong>r may require expertise (other than accounting or auditing) <strong>to</strong> obtain sufficient appropriate audit evidence. This could involve using the work of an audi<strong>to</strong>r’s expert who would provide audit evidence in the form of reports, opinions, valuations, and statements. Some examples are included in the exhibit below. Exhibit 15.8-2 Need for an Audi<strong>to</strong>r’s Expert? • Specialized inven<strong>to</strong>ry counters; • Valuations of assets such as land and buildings, plant and machinery, works of art, precious s<strong>to</strong>nes, inven<strong>to</strong>ry, and complex financial instruments; • Determination of quantities or physical condition of assets such as minerals s<strong>to</strong>red in s<strong>to</strong>ckpiles, underground mineral and petroleum reserves, and the remaining useful life of plant and machinery; • Determination of amounts using specialized techniques or methods such as actuarial valuation; • The analysis of complex or unusual tax-compliance issues; • The measurement of work completed, and <strong>to</strong> be completed, on contracts in progress; and • Legal opinions concerning interpretations of agreements, statutes and regulations. This standard provides guidance on how the work of an audi<strong>to</strong>r’s expert can be used as appropriate audit evidence. In some cases, an audi<strong>to</strong>r who is not an expert in a relevant field other than accounting or auditing may be able <strong>to</strong> obtain a sufficient understanding of that field <strong>to</strong> perform the audit without an audi<strong>to</strong>r’s expert. Such an understanding may be obtained through: • Experience in auditing entities requiring similar expertise. • Education or professional development in the particular field. This may include formal courses or discussion (but not consultation where all the relevant facts are provided) with experts in the relevant field. • Discussion with audi<strong>to</strong>rs who have performed similar engagements. Note: Regardless of whether the work of an expert is used or not, the audi<strong>to</strong>r maintains sole responsibility for the audit opinion expressed.
199 <strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts Risk Assessment Paragraph # Relevant Extracts from ISAs 620.7 If expertise in a field other than accounting or auditing is necessary <strong>to</strong> obtain sufficient appropriate audit evidence, the audi<strong>to</strong>r shall determine whether <strong>to</strong> use the work of an audi<strong>to</strong>r’s expert. (Ref: Para. A4-A9) 620.8 The nature, timing and extent of the audi<strong>to</strong>r’s procedures with respect <strong>to</strong> the requirements in paragraphs 9-13 of this ISA will vary depending on the circumstances. In determining the nature, timing and extent of those procedures, the audi<strong>to</strong>r shall consider matters including: (Ref: Para. A10) (a) The nature of the matter <strong>to</strong> which that expert’s work relates; (b) The risks of material misstatement in the matter <strong>to</strong> which that expert’s work relates; (c) The significance of that expert’s work in the context of the audit; (d) The audi<strong>to</strong>r’s knowledge of and experience with previous work performed by that expert; and (e) Whether that expert is subject <strong>to</strong> the audi<strong>to</strong>r’s firm’s quality control policies and procedures. (Ref: Para. A11-A13) 620.9 The audi<strong>to</strong>r shall evaluate whether the audi<strong>to</strong>r’s expert has the necessary competence, capabilities and objectivity for the audi<strong>to</strong>r’s purposes. In the case of an audi<strong>to</strong>r’s external expert, the evaluation of objectivity shall include inquiry regarding interests and relationships that may create a threat <strong>to</strong> that expert’s objectivity. (Ref: Para. A14-A20) 620.10 The audi<strong>to</strong>r shall obtain a sufficient understanding of the field of expertise of the audi<strong>to</strong>r’s expert <strong>to</strong> enable the audi<strong>to</strong>r <strong>to</strong>: (Ref: Para. A21-A22) (a) Determine the nature, scope and objectives of that expert’s work for the audi<strong>to</strong>r’s purposes; and (b) Evaluate the adequacy of that work for the audi<strong>to</strong>r’s purposes. 620.11 The audi<strong>to</strong>r shall agree, in writing when appropriate, on the following matters with the audi<strong>to</strong>r’s expert: (Ref: Para. A23-A26) (a) The nature, scope and objectives of that expert’s work; (Ref: Para. A27) (b) The respective roles and responsibilities of the audi<strong>to</strong>r and that expert; (Ref: Para. A28-A29) (b) The nature, timing and extent of communication between the audi<strong>to</strong>r and that expert, including the form of any report <strong>to</strong> be provided by that expert; and (Ref: Para. A30) (b) The need for the audi<strong>to</strong>r’s expert <strong>to</strong> observe confidentiality requirements. (Ref: Para. A31)
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