Guide to Using International Standards on Auditing in - IFAC

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200 <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 The exhibit below summarizes the considerations relating <strong>to</strong> engaging an audi<strong>to</strong>r’s expert. Exhibit 15.8-3 Is an audi<strong>to</strong>r’s expert needed <strong>to</strong> obtain audit evidence? yes Consider need in relation <strong>to</strong>: - Obtaining an understanding of the entity, including internal control - Identifying/assessing the risks of material misstatement - Determining/implementing overall responses <strong>to</strong> assessed risks at financial statement level - Designing/performing further audit procedures <strong>to</strong> respond <strong>to</strong> assessed risks at assertion level - Evaluating sufficiency/appropriateness of audit evidence obtained <strong>to</strong> form an opinion. no What procedures are required? (Nature/timing/extent) Consider: - Nature of matter and risks of material misstatement - Significance of expert's work - Previous work performed by that expert - If expert is subject <strong>to</strong> firm's quality control policies. Is chosen expert competent, capable, and objective? yes no Do we (audi<strong>to</strong>r) understand expert’s field of expertise? yes Is understanding sufficient <strong>to</strong>: - Plan the audit? - Review the results of work performed? no no Agree on terms of engagement. Agree upon: - Nature, scope, and objectives of expert’s work - Respective roles and responsibilities - Nature, timing, and extent of communication, including report format - Need for confidentiality. Plan alternative audit procedures appropriate <strong>to</strong> the circumstances. Exhibit 15.8-4 Consider Is an Audi<strong>to</strong>r’s Expert Needed <strong>to</strong> Obtain Audit Evidence? Discussion Consider need in relation <strong>to</strong>: • Obtaining an understanding of the entity, including internal control; • Identifying/assessing the risks of material misstatement; • Determining/implementing overall responses <strong>to</strong> assessed risks at the financial statement level; • Designing/performing further audit procedures <strong>to</strong> respond <strong>to</strong> assessed risks at the assertion level; and • Evaluating the sufficiency/appropriateness of audit evidence obtained <strong>to</strong> form an opinion.
201 <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 Consider What Audit Procedures are Required? Is Chosen Audi<strong>to</strong>r’s Expert Competent, Capable, and Objective? Do We (Audi<strong>to</strong>r) Understand Expert’s Field of Expertise? Agree on Terms of Engagement Discussion Consider: • The nature of the matter and the risks of material misstatement; • The significance of the expert’s work in the context of the audit; • Previous work (if any) performed by that expert; and • Whether the expert is subject <strong>to</strong> the audi<strong>to</strong>r’s firm’s quality control policies and procedures. • Competence relates <strong>to</strong> the nature and level of expertise of the audi<strong>to</strong>r’s expert. • Capability relates <strong>to</strong> the ability of the audi<strong>to</strong>r’s expert <strong>to</strong> exercise that competence in the circumstances of the engagement (e.g. geographic location and the availability of time and resources). • Objectivity relates <strong>to</strong> the possible effects that bias, conflict of interest, or the influence of others may have on the professional or business judgment of the audi<strong>to</strong>r’s expert. Other fac<strong>to</strong>rs <strong>to</strong> consider include: • Personal experience with previous work of that expert; • Discussions with that expert; • Discussions with others familiar with that expert’s work; • Knowledge of that expert’s qualifications, membership of a professional body or industry association, license <strong>to</strong> practice, or other forms of external recognition; • Published papers or books written by that expert; and • The audi<strong>to</strong>r’s firm’s quality control policies and procedures Is there sufficient understanding of the audi<strong>to</strong>r’s expert’s field of work <strong>to</strong>: • Plan the audit; and • Review the results of work performed? In establishing the terms of engagement, consider fac<strong>to</strong>rs such as the following: • Access of the audi<strong>to</strong>r’s expert <strong>to</strong> sensitive or confidential entity information; • The respective roles or responsibilities of the audi<strong>to</strong>r and the audi<strong>to</strong>r’s expert; • Any multi-jurisdictional, legal, or regula<strong>to</strong>ry requirements; • The complexity of the work required; • Previous experience by the audi<strong>to</strong>r’s expert with the entity; and • The extent of the audi<strong>to</strong>r’s expert’s work, and its significance in the context of the audit. The written agreement would address: • Nature, scope, and objectives of expert’s work; • Respective roles and responsibilities; • Nature, timing, and extent of communication, including the report format; and • Need for confidentiality. Appendix <strong>to</strong> ISA 620 sets out matters that the audi<strong>to</strong>r may consider for inclusion in any written agreement with an audi<strong>to</strong>r’s external expert.
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