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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Audit procedures and obtaining evidence

Corbin & Lau, auditors of Verdant Foods, wish to rely on a valuation report on the company's specialised plant prepared by an external valuer engaged by management. Under ISA 500 (management's expert), which action is MOST essential before using the report as audit evidence?

The auditor should evaluate the management's expert's competence, capabilities and objectivity, understand their work, and assess whether it is appropriate audit evidence. Full re-performance is not required, indemnities give no evidence, and the auditor's report should not refer to the expert for an unmodified opinion.

  1. AEvaluate the expert's competence, capabilities and objectivity, and the appropriateness of their work as audit evidenceCorrect
  2. BObtain a signed indemnity from the valuer limiting the auditor's liability
  3. CRe-perform the entire valuation using the audit firm's own staff
  4. DRefer to the valuer's work in the auditor's report to share responsibility

Explanation

ISA 500 requires the auditor to evaluate the competence, capabilities and objectivity of a management's expert, obtain an understanding of their work, and evaluate its appropriateness as evidence. Re-performing the entire valuation is not required. Indemnities do not provide evidence, and referring to the expert in the report is not appropriate for an unmodified opinion.

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