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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Using the work of others

Delta & Co is auditing Kestrel Foods plc. Kestrel uses an external actuary, engaged by management, to measure its defined benefit obligation. Which procedure is required by ISA 500 when the auditor intends to use this actuary's work as audit evidence?

The auditor must evaluate the actuary's competence, capabilities and objectivity, understand the actuary's work, and evaluate whether it is appropriate audit evidence. Reliance does not require a full re-performance, a modified opinion or a report reference, because the auditor keeps sole responsibility for the opinion.

  1. AEvaluate the actuary's competence, capabilities and objectivity, and obtain an understanding of the actuary's workCorrect
  2. BIssue a modified opinion because the work of a management's expert cannot be relied upon
  3. CReperform the entire actuarial valuation independently without considering the actuary's methods
  4. DRefer to the actuary in the audit report to share responsibility for the opinion

Explanation

ISA 500 requires the auditor to evaluate the competence, capabilities and objectivity of a management's expert, obtain an understanding of the expert's work, and evaluate the appropriateness of that work as audit evidence. Full reperformance is not required, and modification of the opinion is not automatic. Referring to the expert in an unmodified report would imply divided responsibility, which is not allowed.

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