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

CA Kulkarni, auditor of Mahalaxmi Steels Ltd, wants to use the work of an external valuation expert for a material asset. Which approach best fits the Code of Ethics on using the work of an expert?

The auditor should assess the expert's reputation, expertise and available resources, and whether the expert is subject to professional and ethics standards. This information can come from prior association or consulting others. Relying on client recommendation or fees alone is inadequate.

  1. AUse the expert since the client has recommended him, without further enquiry
  2. BConsider the expert's reputation, expertise and resources, and whether the expert is subject to applicable professional and ethics standards, possibly through prior association or consulting othersCorrect
  3. CConsider only the fee charged by the expert
  4. DAvoid any expert, because use of an expert's work is prohibited for a chartered accountant

Explanation

The Code lists the factors to consider: the expert's reputation and expertise, the resources available, and whether the expert is subject to applicable professional and ethics standards. Such information may come from prior association or from consulting others. Option A is wrong because client recommendation does not replace the evaluation of these factors.

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