The least persuasive as it can only be used to verify that a client has accurately converted this information into the financial report. That is, as the client generates and holds this evidence, it is possible that evidence may be manipulated or omitted. 2. Externally Generated Evidence held by Client Includes supplier invoices and statements, customer orders, bank statements, contracts, lease agreements and tax assessments. These sources of evidence are quite persuasive as they are produced by third parties. It is, however, possible that the client can manipulate these documents, which reduces their reliability to the auditor. If the client provides the auditor with photocopies of information from these external sources, rather than originals, the reliability is reduced. 3. Externally Generated Evidence sent directly to the Auditor Includes bank confirmations, debtors’ confirmations, correspondence with the client’s lawyers, including confirmations and representations, and expert valuations. These sources of evidence are considered to be the most reliable and best quality as they are independent of the client. As this evidence is generated by third parties and sent directly to the auditor, the client does not have an opportunity to alter it. Externally generated evidence is considered the most persuasive when the source of that evidence is considered to be reliable, trustworthy and independent of the client. 5.4 Using the Work of an Expert An expert is someone with the skill, knowledge and experience required to aid the auditor to gather evidence. It may be necessary to engage the services of an expert if an auditor does not have the requisite skills and knowledge to assess the validity of an account or a transaction. An expert may be a member of the audit firm, who is not a member of the audit team, an employee of the client, or a person independent of both the audit firm and its client. Steps in using the work of expert ( ASA620/ISA620 ): 1. Assessing the need to use an expert The less knowledge an audit team has of the item under consideration, the greater the risk of material misstatement and the less corroborating evidence available, the more likely an auditor will conclude that an expert opinion is required.
Example: A registered valuer may be engaged to provide an opinion on the value of a client’s property ; a geologist may be engaged to evaluate the quantity and quality of mineral deposits ; a vintner may be engaged to assess the quality and value of wine stocks ; an actuary may be engaged to verify insurance premiums . 2. Determining the scope of the work to be carried out This involves setting the nature, timing and extent of work to be completed by the expert. It is important that the auditor is involved in setting the scope of the work required as the judgement of the expert forms part of the audit evidence upon which the auditor forms their audit opinion.
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- Fall '19