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CA Final · Advanced Auditing, Assurance and Professional Ethics · Audit Planning, Strategy and Execution

Rohit & Associates is auditing Dhanvantari Infra Ltd, which carries complex unquoted financial instruments valued using unobservable inputs. During planning, the engagement partner finds that the team lacks valuation expertise. Under SA 540 read with SA 220, which conclusion is correct?

The engagement partner must be satisfied that the engagement team and any auditor's experts together have the capabilities, competence and time for the engagement. Where the estimates need it, the auditor involves people with specialised valuation skills, rather than proceeding without them or modifying the opinion prematurely.

  1. AThe team should proceed alone, since valuation is management's responsibility and not the auditor's
  2. BThe engagement partner must be satisfied that the team and any auditor's experts collectively have appropriate capabilities, competence and time, which may require involving those with specialised skillsCorrect
  3. CThe auditor should modify the opinion immediately without trying to obtain specialised skills
  4. DSpecialised skills may be considered only after the audit report is drafted

Explanation

SA 540 notes that in planning, the auditor ascertains the resources needed, which may include people with specialised skills, and SA 220 requires the engagement partner to be satisfied that the team and any auditor's experts collectively have the capabilities, competence and time. Modifying the opinion at once or proceeding without expertise ignores this requirement.

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