Will a Specialist be required for the engagement How does the firm stay in compliance with GAAS

Temple University **We aren't endorsed by this school
Nov 14, 2023
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Communication AU-C 260 requires discussions of the elements of the planning process with those charged with corporate governance and management. It is a reasonable expectation that a significant interaction between client and auditor would be required. Effective communication is always a component of success. Planning also includes audit team brainstorming sessions and should be scheduled to allow the team to voice concerns and opinions. Every member needs to be on the same page. The audit is a collective effort. The brainstorming sessions are especially important regarding the team''s approach to detecting fraud. Will a Specialist be required for the engagement? How does the firm stay in compliance with GAAS? The guidance can be found in AU-C 620 for determining the qualifications of a specialist. The auditor assumes responsibility when they rely on the work of the specialist. The audit opinion does not allow the auditor to limit their area of responsibility to only the work they perform. Some circumstance requiring the use of a specialist are: e The actuarial calculation of liabilities associated with insurance contracts or employee benefit plans. Estimation of oil and other mineral reserves. Valuation of environmental liabilities and site cleanup costs. Interpretation of contracts, laws, and regulations. Analysis of complex or unusual tax compliance issues. Valuation of complex financial instruments and nonfinancial assets and liabilities measured at fair value such as land and buildings, plant, and machinery, works of art, antiques, intangible assets, assets acquired and liabilities assumed in business combinations, and assets that may have been impaired. The client directly hires an outside specialist. There must be a signed engagement letter between the specialist and the client. The auditor needs a signed "Statement of Independence" from the specialist to the firm. Assess client business risk Business Risk focuses on circumstances and events that may interfere with the company's goals and operating strategies. Lesson 5 on Internal Controls covers some requirements under SOX placed on management to periodically complete a risk assessment. Issues may relate to: Earnings goals Risk related to environmental concerns and clean-up from hazardous materials. Product obsolescence. Potential financial losses. Business failure.
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