2G - Using the Work of a Specialist

2G - Using the Work of a Specialist Examples of Specialists - Valuation (e.g., appraisers and fair value experts) - Amounts derived by specialized techniques (e.g., actuaries or environmental remediation consultants) - Quantity or condition (e.g., engineers or geologists, such as for estimates of oil and gas reserves or condition of minerals) - Interpretation (e.g., attorneys or regulatory experts) - Does NOT include internal audit Evaluating Management's Specialist - Consider objectivity, competency, and capabilities of specialist o Obtain understanding work of specialist, including any required technical or professional standards o Use a variety of sources, such as personal experience, discussions with specialists and others, etc. Inherent Threats to Objectivity - Threat to objectivity will always exist when specialist is employed by management, and should be safeguarded - Evaluate relationship with client o Consider performing additional procedures on assumptions, methods, or findings o Consider using an auditor's specialist to corroborate work Audit Procedures When Using Work of Auditor's Specialist - Nature, timing, and extent of audit procedures will depend on the circumstances, including the following: o Nature of matter in which specialist is required o Risks of material misstatement and significance to audit o Auditor's knowledge of and experience with the specialist o Whether specialist is subject to firm's quality control policies and procedures Evaluate Auditor's Specialist - Evaluate competence, capabilities, and objectivity of specialist for the auditor's purposes o Inquire regarding threats to objectivity o Use a variety of sources, such as personal experience and inquiry of specialist and others o Obtain knowledge of qualifications, including professional associations, license or similar o Obtain agreement as to roles and responsibilities o Include within scope of quality control policies and procedures Auditor's Responsibilities - Establish agreement relating to nature, objectives, and scope of work, including form and content of specialist's report and other communications - Understand significant assumptions and methods used

Specialist's Responsibilities - Appropriateness and reasonableness of methods and assumptions used, and application of procedures - Accept findings of specialist and related financial statement assertions, UNLESS auditor's procedures determine findings are unreasonable Procedures if Specialist's Finding Indicate Misstatement - Evaluate reasonableness of specialist's findings o If reasonable, treat as identified misstatement - Perform additional procedures if specialist's findings NOT deemed reasonable o Consider obtaining opinion of another specialist - Ultimately, consider whether sufficient appropriate evidence obtained to support audit report Impact on Audit Report - If uncertainty remains after application of additional procedures, issue qualified or disclaimer of opinion. - If financial statements are known to be incorrect , issue qualified or adverse opinion . - Mention use of specialist only if will help readers understand reason for other than unqualified report o MUST indicate in auditor's report that reference does NOT reduce auditor's responsibility for the opinion o Do NOT refer to specialist in an unmodified opinion Question #1 Which of the following is included under the guidance contained in AU-C Section 620, Using the Work of an Auditor's Specialist? a) Internal auditor b) Component auditor c) Actuary engaged by reporting entity management d) Fair value expert engaged by CPA firm Question #2 Which of the following should the auditor evaluate related to the auditor's specialist to determine whether to use the work of the auditor's specialist as audit evidence? a) Independence b) Objectivity c) Due professional are d) Profitability Question #3 In which of the following situations may an auditor reference the work of the auditor's specialist in the auditor's report? a) When the report contains an unmodified opinion b) When relevant to understanding an auditor's modified opinion c) Every time an auditor's specialist is used on an audit d) Never