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CA Intermediate · Auditing and Ethics · Audit Evidence

During the audit of Anand Foods Ltd, the auditor uses the management's expert, a firm of valuers engaged by the company, to value a freehold plot. The valuer is a company director's brother-in-law. Under SA 500 on Audit Evidence, what is the auditor's correct response?

The auditor should evaluate the expert's competence, capabilities and objectivity, taking the family relationship into account, and obtain further evidence if objectivity is threatened. SA 500 does not permit blind acceptance of a management's expert's work, nor an immediate adverse opinion.

  1. AEvaluate the expert's competence, capabilities and objectivity, considering the relationship, and obtain further evidence if objectivity is threatenedCorrect
  2. BAccept the valuation fully because management engaged a registered valuer
  3. CReject the valuation and issue an adverse opinion immediately
  4. DRely on the valuation but disclose the relationship in the audit report as a Key Audit Matter

Explanation

SA 500 requires the auditor to evaluate competence, capabilities and objectivity of a management's expert, including relationships that may threaten objectivity. Where objectivity is doubtful the auditor needs additional evidence, for example another expert. Immediate adverse opinion is premature, and a report disclosure does not replace evaluating the evidence.

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