ISA 620

Using the Work of an Auditor's Expert

1Objective and scope

ISA 620 deals with the auditor's responsibilities relating to the work of an individual or organisation in a field of expertise other than accounting or auditing, when that work is used to assist the auditor in obtaining sufficient appropriate audit evidence. It does not deal with situations where the engagement team includes a member, or the auditor consults a person, with expertise in a specialised area of accounting or auditing (that is covered by ISA 220), nor with the auditor's use of the work of an expert engaged by the entity (a management's expert, covered by ISA 500). The auditor has sole responsibility for the opinion, and that responsibility is not reduced by the use of an expert; if the auditor concludes the expert's work is adequate, the auditor may accept its findings as appropriate evidence.

The objectives are to determine whether to use the work of an auditor's expert; and if so, to determine whether that work is adequate for the auditor's purposes.

2Key definitions

3Requirements

Determining the need for an expert

If expertise in a field other than accounting or auditing is necessary to obtain sufficient appropriate audit evidence, the auditor determines whether to use the work of an auditor's expert. The need may arise in understanding the entity and its environment, in identifying and assessing risks, in determining and implementing responses (including designing and performing procedures), and in evaluating the sufficiency and appropriateness of evidence obtained. Factors: whether management has used a management's expert, the nature and significance of the matter including its complexity, the risks of material misstatement, and the expected nature of procedures and the auditor's knowledge and experience with the matter. The engagement team's own expertise is considered first; an expert is not a substitute for auditing knowledge the team should have.

Nature, timing and extent of procedures, and evaluating the expert

• The nature, timing and extent of the auditor's procedures relating to the expert's work vary with the circumstances: the nature of the matter, the risks, the significance of the work in the context of the audit, the auditor's knowledge of and experience with previous work of the expert, and whether the expert is subject to the firm's quality management policies (an internal expert is; an external one is not, so more evaluation is needed).
• Evaluate whether the expert has the necessary competence (professional qualifications, membership of a professional body, experience and reputation in the field), capabilities (the resources and time to perform the work) and objectivity. Threats to objectivity are evaluated in the same categories as for the auditor (self-interest, self-review, advocacy, familiarity, intimidation); for an external expert the auditor inquires about interests and relationships with the entity, and may obtain written representation from the expert. An expert who is not objective is not used.
• Obtain a sufficient understanding of the field of expertise to be able to determine the nature, scope and objectives of the expert's work for the auditor's purposes, and to evaluate the adequacy of that work: the auditor does not need the expert's knowledge, but must understand the assumptions and methods, the relevant standards of the profession and the data the expert will use.

Agreement with the expert

The auditor agrees, in writing where appropriate (always, for an external expert on a significant matter), the nature, scope and objectives of the expert's work; the respective roles and responsibilities of the auditor and the expert; the nature, timing and extent of communication between them, including the form of any report; and the need for the expert to observe confidentiality requirements. The agreement is an engagement letter in effect: it specifies the item to be valued or calculated, the basis (fair value under IFRS 13, value in use under IAS 36), the date, the assumptions to be used or independently developed, the data the entity will supply, the format and timing of the report, and the expert's access to the entity.

Evaluating the adequacy of the expert's work

• Evaluate the relevance and reasonableness of the expert's findings or conclusions and their consistency with other audit evidence (the valuer's figure against recent transactions, the actuary's discount rate against market yields, the reserves engineer's estimate against production history).
• If the expert's work involves the use of significant assumptions and methods, evaluate their relevance and reasonableness in the circumstances, including whether they are generally accepted in the field, consistent with the requirements of the framework, and consistent with those used by management where appropriate.
• If the expert's work involves the use of source data that is significant to the work, evaluate the relevance, completeness and accuracy of that source data, testing the entity-supplied data the auditor's expert relied on (the floor areas given to a valuer, the employee census given to an actuary).
• If the auditor determines the expert's work is not adequate, agree with the expert on the nature and extent of further work to be performed, or perform additional procedures appropriate in the circumstances. If adequate evidence cannot be obtained, the opinion is modified for a limitation on scope.

4Documentation and reporting

The audit file records the determination of the need for an expert, the evaluation of the expert's competence, capabilities and objectivity (with the inquiries made and any written confirmation), the understanding obtained of the field, the written agreement, the expert's report, the auditor's evaluation of the findings, assumptions, methods and source data, and the conclusion on adequacy. The auditor does not refer to the work of an auditor's expert in an auditor's report containing an unmodified opinion, unless required by law or regulation; if such reference is required, the report indicates that the reference does not reduce the auditor's responsibility for the opinion. If the auditor makes reference to the expert's work in the report because that reference is relevant to an understanding of a modification, the auditor indicates that the reference does not reduce the auditor's responsibility for that opinion.

5Examinable focus