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CA Final · Advanced Auditing, Assurance and Professional Ethics · Professional Ethics & Liabilities of Auditors

CA Deepak, auditor of Zenith Pharma Ltd., plans to rely on a valuation expert engaged by management to value intangible assets. Deepak has no prior experience with the expert. Consistent with the Code of Ethics on using the work of an expert, which approach is best?

Deepak should evaluate the expert's reputation, expertise, resources and whether the expert is subject to professional and ethics standards, gaining this through prior association or by consulting others. Presuming competence merely because management engaged the expert is inappropriate.

  1. AAccept the work, since a management-engaged expert is presumed competent
  2. BConsider the expert's reputation, expertise, resources and whether the expert is subject to professional and ethics standards, possibly by consulting others about the expertCorrect
  3. CReject the expert solely because he was engaged by management
  4. DRely on the expert since the auditor is not responsible for the expert's work in any case

Explanation

The Code lists factors to consider when intending to use an expert: the expert's reputation, expertise and resources, and whether the expert is subject to applicable professional and ethics standards. Such information may be gained from prior association or by consulting others. Presuming competence skips this evaluation.

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