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appropriate audit evidence’ (emphasis added). The auditor may need an expert when, for example, assessing the valuation of assets that may have been impaired. The key requirements of ISA 620 must be met when engaging an expert. There has been an increase in the use and importance of specialists in recent years that is due, in part, to the increasing complexity of business transactions reported in a company’s financial statements. In contrast to an expert, ISA 220 refers to an individual who has expertise in a specialized area of accounting or auditing. This specialist can be either a member of the engagement team or outside of the engagement team. Example – Experts and specialistsAs part of the year-end audit, you have engaged two individuals to assist the audit team with both the audit of tax and reviewing legal cases in relation to potential contingent liabilities. The first individual has expertise in applying methods of accounting for deferred income tax and the second person has expertise in tax law. The first person is considered a specialist under ISA 220 and the second person is considered an expert under ISA 620.
Chartered Accountants Program Audit & AssurancePage 12-27 CCUnit 12 – Core contentImplications of using the work of an expert on the audit processThe decision to engage an expert in order to obtain audit evidence related to an area outside the auditor’s own area of expertise is not a simple one. Further, there are a number of steps that an auditor must take before they can rely on the work of an expert.The diagram below summarises the key requirements of ISA 620, and illustrates how using the work of an expert is considered throughout the audit process:Risk assessmentIs an expert needed to obtain audit evidence? If yes:t!8IBU!QSPDFEVSFT!XJMM!CF!SFRVJSFE t!*T!UIF!FYQFSU!TFMFDUFE!DPNQFUFOU-!DBQBCMF!BOE!PCKFDUJWF $BO!XF!VOEFSTUBOE!UIF!OBUVSF!PG!XPSL!QFSGPSNFE!CZ!UIF!FYQFSU "HSFF!PO!UFSNT!PG!FOHBHFNFOU!XJUI!UIF!expertRisk response&WBMVBUF!BEFRVBDZ!PG!XPSL!QFSGPSNFE!CZ!UIF!FYQFSU!JODMVEJOH!öOEJOHT-!DPODMVTJPOT-!BTTVNQUJPOT!VTFE-!BOE!TPVSDFT!PG!EBUB%FUFSNJOF!JG!BOZ!GVSUIFS!BVEJU!XPSL!SFRVJSFEReporting%P!OPU!NBLF!SFGFSFODF!UP!XPSL!PG!BO!FYQFSU!VOMFTT!BVEJUPS(T!SFQPSU!IBT!CFFO!NPEJöFE!PS!SFRVJSFE!CZ!MBX!PS!SFHVMBUJPOIf insufficient appropriate audit evidence XBT!PCUBJOFE-!NPEJGZ!UIF!BVEJUPS(T!SFQPSUAdapted from:Australian audit manual and toolkit 2015 for small and medium sized entities, Exhibit 13.9–1, p. 229.Examples of areas in which the auditor may need to consider using the work of an expert include:•Valuations of assets, such as land and buildings, plant and machinery, works of art, precious stones, inventory and complex financial instruments.•Determination of quantities or the physical condition of assets, such as stockpiles of stored minerals, underground mineral and petroleum reserves, and the remaining useful life of different pieces of plant and machinery.