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CA Intermediate · Auditing and Ethics · Audit Evidence

During the audit of Kaveri Pharma Ltd, the auditor needs to rely on a management expert's valuation report on a plot of land. Under SA 500, which step is required of the auditor before using the expert's work as audit evidence?

The auditor must evaluate the management expert's competence, capabilities and objectivity, understand the expert's work and judge whether it is appropriate audit evidence for the assertion. Merely accepting the report because the company engaged the expert is not sufficient under SA 500.

  1. AAccept the report without further work since the expert is engaged by the company
  2. BEvaluate the competence, capabilities and objectivity of the management's expert, and the appropriateness of the expert's work as audit evidenceCorrect
  3. CReplace the expert's valuation with the circle rate fixed by the state government
  4. DDisclose the expert's name in the audit report as a mandatory requirement

Explanation

SA 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 its appropriateness as audit evidence for the relevant assertion. Accepting it blindly is wrong because the expert is not independent of management. Naming the expert in the report is not required.

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