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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Evidence and testing considerations

In auditing Bellcrest Co's goodwill impairment, the auditor wants to use a valuation report prepared by a management's expert, an external firm engaged by Bellcrest. Under ISA 500, which action is required of the auditor when using this information as audit evidence?

The auditor must evaluate the management's expert's competence, capabilities and objectivity, understand their work, and assess whether it is appropriate audit evidence for the assertion. External appointment alone is not enough, full re-performance is not required, and the auditor's responsibility is not reduced by naming the expert.

  1. AAccept the report because the expert is external, so no evaluation is needed
  2. BEvaluate the expert's competence, capabilities and objectivity, understand their work, and evaluate the appropriateness of that work as evidence for the relevant assertionCorrect
  3. CRe-perform the whole valuation and disregard the expert's report
  4. DDisclose the expert's name 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. External status does not remove this. Full re-performance is not required, and referring to the expert in the report does not reduce the auditor's responsibility.

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