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

Orchid plc measures an investment property at fair value using a valuation from an external expert engaged by management. The auditor, Marlow & Partners, plans to rely on that valuation as audit evidence. Under ISA 540 (Revised) and ISA 500, which action is most appropriate regarding the management's expert?

The auditor should evaluate the management's expert's competence, capabilities and objectivity and obtain an understanding of their work, including data, methods and assumptions, to judge whether it is appropriate audit evidence. The auditor cannot accept it blindly, and the auditor retains full responsibility for the opinion.

  1. AEvaluate the expert's competence, capabilities and objectivity, and obtain an understanding of their work, including the data, methods and assumptions usedCorrect
  2. BAccept the valuation without further work because the expert is independent of the auditor
  3. CRefer to the expert in the auditor's report to share responsibility for the opinion
  4. DReplace the valuation with the auditor's own estimate in all cases

Explanation

When using the work of a management's expert, ISA 500 requires evaluating competence, capabilities and objectivity and understanding and evaluating the expert's work as audit evidence. Accepting it unquestioned is wrong, and an unmodified opinion report does not refer to the expert, since the auditor retains sole responsibility.

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