OTHERS USING THE WORK OF ANOTHER AUDITOR (ISA 600) 1. Purpose: The purpose of this SA is to establish standards to be applied in situations where an auditor (principal auditor),reporting on the financial information of an entity, uses the work of another auditor (other auditor) with respect to the financial information of one or more branches/components included in F.S. 2. The principal auditor Can rely, unless there are special cases. USING THE WORK OF ANOTHER AUDITOR (ISA 600) 3. Perform audit procedures: When using such work, the principal auditor should: a. Advise the other auditor of the use that is going to be made of the other auditors work. b. Inform other auditor areas requiring special consideration, timetable for completion of audit. c. Advise the other auditor of the significant accounting , auditing and reporting requirements and obtain representation as to compliance with them. USING THE WORK OF ANOTHER AUDITOR (ISA 600) 4. Discussion or questionnaire or meet: The principal auditor may discuss with the other auditor to answer a questionnaire or may also meet the other auditor. 5. The principal auditor may discuss with the other auditor or management affecting the financial information of the components 6. Supplementary tests: He may also carry out supplementary tests of the F.S. of the branch. USING THE WORK OF ANOTHER AUDITOR (ISA 600) 7.Documentation: a. The principal auditor should document in his working papers the components (Branches) whose financial statements were audited by other auditors, the names of the other auditors b. Procedures performed & conclusions reached. c. Qualifications: Where the other auditors report is qualified, the principal auditor should also document how he has dealt with the qualifications or adverse remarks contained in the other auditors report in framing his own report. USING THE WORK OF ANOTHER AUDITOR (ISA 600) 8. Coordination between Auditors: 9.Reporting Considerations: Qualification of other auditor, Qualified report Cant use 10.The principal auditor would not be responsible in respect of the work entrusted to the other auditors , except in circumstances which should have aroused his suspicion about the reliability of the work performed by the other auditors. USING THE WORK OF AN AUDITORS EXPERT USING THE WORK OF AN AUDITORS EXPERT Expert- person or firm possessing special skill, knowledge and experience in a particular field other than accounting and auditing. Common example of experts work include: Valuation of precious stone, work of arts, real state and other specialized asset Determination of amount using specialized technique like actuarial computation Interpretation of technical requirements, regulation, or contracts such as legal document or legal title to property PSA 620 identifies 2 kinds of expert namely: Managements expert An expert, whose work in his field of specialization, is used by entity to assist the entity in preparing financial statement Auditors expert An expert, whose work in his field of specialization, is used by the auditor to assist the auditor in obtaining sufficient appropriate audit evidence. Determining the need for an auditors expert When determining the need to use the work of an expert, the auditor would consider Whether management has used a managements expert in preparing the financial statement The nature and significant of the matter, including its complexity The risk of material misstatement in the matter The expected nature of procedure to respond to identified risks, including the auditors knowledge of and experience with the work of experts in relation to such matter; and the availability of alternative sources of audit evidence Evaluating the auditors expert
The auditor must:
1. assess the competence and objectivity of the expert. The following factor must be considered when assessing competence Professional certification or licensing by or membership in, an appropriate professional body Experience and reputation in the field in which the auditor is seeking audit evidence 2. understand the field of the expertise of auditors expert. To determine the nature, scope, and objectives if that experts work; and to evaluate the adequacy of that work for the auditors purpose 3. establish the terms of the agreement with the expert The auditor and the expert should agree on the matters such as the nature, scope, and objectives if that experts work; their duties and responsibilities, timing of completion; and the need for the auditor expert to observe confidentiality requirements. If appropriate, such agreement has to be in writing 4. evaluate the result of the work of the expert would require consideration of the experts source of data, assumption and method, and the result of experts work in light of the auditors knowledge if the clients business and the result of other audit procedure If the auditors expert is not adequate for the auditors purpose, the auditor should agree with the expert on the nature and extent of additional work performed; or the auditor may perform further audit procedures appropriate in the circumstances Effect of the reliance on experts work on the audit report The auditor has sole responsibility for the audit opinion expressed, and that responsibility is not reduced by the auditors use of the work of an expert. Thus, the auditor should not refer to the work of an auditors expert in an auditors report containing an unmodified opinion Effect of the reliance on experts work on the audit report When auditors report contain modified opinion, the auditor can make reference to the experts work if the auditor believes that such reference is necessary in order for the readers to understand the reason for expressing a modified opinion. When this happen the auditor should indicate in his report that such reference does not reduce the CONSIDERING THE WORK OF INTERNAL AUDITORS CONSIDERING THE WORK OF INTERNAL AUDITORS Internal auditing is an appraisal activity established within an entity as a service to the entity The external auditor should obtain a sufficient understanding of the internal audit activities to assist in planning the audit and developing an effective audit approach. CONSIDERING THE WORK OF INTERNAL AUDITORS 2 important phases Making a preliminary assessment of internal auditing Evaluating and testing the work of internal auditing preliminary assessment of internal auditing External auditor should consider the internal auditors: competence Consider the professional qualification and experience of the internal auditors. Objectivity Consider the organizational level to which the internal auditors report the result of their work Due professional care Consider proper planning, supervision and documentation of internal auditors work preliminary assessment of internal auditing Scope of function Consider the nature and extent of the internal auditors assignment Evaluating and testing the work of internal auditing When external auditor decide to use the work of internal auditor, the external auditor will have to evaluate and test the internal auditors work to confirm its adequacy for the external auditors purpose The external auditor may also request assistance of the internal auditor in performing routine or mechanical audit procedure Evaluating and testing the work of internal auditing
It is important that all judgements
relating to the audit of financial statement are those of the external auditor.The auditors responsibility for audit opinion is not reduced by any use made of internal auditing TAPOS NA