WHO IS AUDITOR’S EXPERT AND WHAT THEY DO IN AN AUDIT WORK ?

Auditors are experts in accounting and auditing matters, but they are not reasonably expected to be experts in any other field. Therefore, in performing the audit works the auditor needs the assistance from an expert to assist the auditor in obtaining sufficient appropriate audit evidence.

ISA 620 deals with using the work of an auditor’s expert. As stated in para.3 :

The auditor has sole responsibility for the audit opinion expressed, and that responsibility is not reduced by the auditor’s use of the work of an auditor’s expert. Nonetheless, if the auditor using the work of an auditor’s expert, having followed this ISA, concludes that the work of that expert is adequate for the auditor’s purposes, the auditor may accept that expert’s findings or conclusions in the expert’s field as appropriate audit evidence

So, WHO IS AUDITOR’S EXPERT that meet the definition of ISA 620 ?

Auditor’s expert is an individual or organization possessing expertise in a field other than accounting or auditing, whose work in that field is used by the auditor to assist the auditor in obtaining sufficient appropriate audit evidence. An auditor’s expert may be either an auditor’s internal expert (who is a partner or staff, including temporary staff, of the auditor’s firm or a network firm), or an auditor’s external expert.

Expertise in a field other than accounting or auditing may include expertise in relation to such matters as :

• The valuation of complex financial instruments, land and buildings, plant and machinery, jewelry, works of art, antiques, intangible assets, assets acquired and liabilities assumed in business combinations and assets that may have been impaired
• The actuarial calculation of liabilities associated with insurance contracts or employee benefit plans
• The estimation of oil and gas reserves
• The valuation of environmental liabilities, and site clean-up costs
• The interpretation of contracts, laws and regulations
• The analysis of complex or unusual tax compliance issues

As stated in para. A2 of ISA 620, in many cases, distinguishing between expertise in accounting or auditing, and expertise in another field, will be straightforward, even where this involves a specialized area of accounting or auditing. For example, an individual with expertise in applying methods of accounting for deferred income tax can often be easily distinguished from an expert in taxation law. The former is not an expert for the purposes of ISA 620 as this constitutes accounting expertise; the latter is an expert for the purposes of ISA 620 as this constitutes legal expertise. Similar distinctions may also be able to be made in other areas, for example, between expertise in methods of accounting for financial instruments, and expertise in complex modeling for the purpose of valuing financial instruments.

In some cases, however, particularly those involving an emerging area of accounting or auditing expertise, distinguishing between specialized areas of accounting or auditing, and expertise in another field, will be a matter of professional judgment. Applicable professional rules and standards regarding education and competency requirements for accountants and auditors may assist the auditor in exercising that judgment (HRD).

2012 Handbook of the CODE of ETHICS for PROFESSIONAL ACCOUNTANTS

On July 31, 2012, the International Ethics Standards Board for Accountants (IESBA) of IFAC has issued the 2012 Handbook of the Code of Ethics for Professional Accountants (the Code).

The 2012 Handbook which effective since January 1, 2011 replaces the 2010 edition of the Handbook of the Code of Ethics for Professional Accountants. No changes of substance of the 2012 edition of the handbook from the previous version. However, editorial amendments have been made.

The issuance of the Code by IESBA is aimed for use by professional accountants around the world. As stated within the Section 100.1 of the Code :

A distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest. Therefore, a professional accountant’s responsibility is not exclusively to satisfy the needs of an individual client or employer. In acting in the public interest, a professional accountant shall observe and comply with the Code. If a professional accountant is prohibited from complying with certain parts of this Code by law or regulation, the professional accountant shall comply with all other parts of this Code.

The Code contains three parts. PART A establishes the fundamental principles of professional ethics for professional accountants and provides a conceptual framework that professional accountants shall apply to :

1. Identify threats to compliance with the fundamental principles;
2. Evaluate the significance of the threats identified; and
3. Apply safeguards, when necessary, to eliminate the threats or reduce them to an acceptable level. Safeguards are necessary when the professional accountant determines that the threats are not at a level at which a reasonable and informed third party would be likely to conclude, weighing all the specific facts and circumstances available to the professional accountant at that time, that compliance with the fundamental principles is not compromised.

A professional accountant shall use professional judgment in applying this conceptual framework.

PART B and C describe how the conceptual framework applies in certain situations. They provide examples of safeguards that may be appropriate to address threats to compliance with the fundamental principles. They also describe situations where safeguards are not available to address the threats, and consequently, the circumstance or relationship creating the threats shall be avoided.

Part B applies to professional accountants in public practice. While Part C applies to professional accountants in business. Nevertheless, professional accountants in public practice may also find Part C relevant to their particular circumstances.

Download the Code from here : The 2012 Handbook of the Code of Ethics for Professional Accountants