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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Evidence and testing considerations

Brandt & Co audits Tallis Pharma. Management's expert valued a portfolio of patents, and the auditor wants to use this work as audit evidence under ISA 500 and ISA 620. The expert is employed by a firm that also provides consulting to Tallis. Which response is most appropriate?

The auditor should evaluate the management's expert's competence, capabilities and objectivity, considering the consulting relationship as a possible threat to objectivity, and evaluate whether the work is appropriate as evidence. It need not be rejected outright, but it needs additional scrutiny and procedures.

  1. ATreat the work as an auditor's expert's work, because any expert's report becomes the auditor's evidence once obtained
  2. BReject the evidence entirely, since a management's expert can never provide reliable audit evidence
  3. CInclude the expert's name in the audit report to demonstrate that the evidence was relied on
  4. DEvaluate the expert's competence, capabilities and objectivity, including the consulting relationship as a threat to objectivity, and evaluate the appropriateness of the work as evidenceCorrect

Explanation

ISA 500 requires the auditor to evaluate the competence, capabilities and objectivity of a management's expert and to obtain understanding of the work. The consulting relationship is a threat to objectivity to be considered, with possible additional procedures. The evidence is not automatically unreliable, and the work is not treated as an auditor's expert's work.

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