This Guidance Statement has been developed to provide guidance on:
- The circumstances under which a management’s expert may be used and the nature of that work;
- The auditor’s considerations in determining whether to use the work of a management’s expert as audit evidence in carrying out the responsibilities of the auditor with respect to an entity's financial report or other historical financial information; and
- The auditor’s considerations in determining the information to be used as audit evidence.
Scope of this Guidance Statement
Management or Management’s Expert
Where the necessary information to prepare the financial report and/or historical financial information is produced by management, ASA 330 requires the auditor to design and perform audit procedures whose nature, timing and extent are based on and are responsive to the risk of material misstatement at the assertion level as identified and assessed by the auditor in accordance with ASA 315.
Where the necessary information to prepare the financial report and/or historical financial information is produced by a management’s expert, ASA 500 Audit Evidence, establishes mandatory requirements and provides application and explanatory material on using the work of a management’s expert as audit evidence. This Guidance Statement is to be read in conjunction with ASA 500. Examples of management’s experts are included in paragraphs 16 to 18 of this Guidance Statement.
This Guidance Statement applies to the use of a management’s expert’s work irrespective of whether they are internal or external to an entity, but does not deal with the use of experts that are not engaged or employed by management.
The work of a management’s expert is often associated with accounting estimates. ASA 540 Auditing Accounting Estimates and Related Disclosures establishes mandatory requirements and provides application and explanatory material on auditing accounting estimates. This Guidance Statement is to be read in conjunction with ASA 540.
Considerations in Using the Work of an Auditor’s Expert
It is the responsibility of the engagement partner to determine that the engagement team has the appropriate competence and capabilities, including sufficient time, to perform an audit engagement in accordance with the Australian Auditing Standards, relevant ethical requirements, and applicable legal and regulatory requirements. When management uses the work of a management’s expert to assist the entity in preparing the financial report, the auditor determines whether the involvement of an auditor’s expert is required.
There is no requirement for the auditor to use an auditor’s expert to evaluate the work performed by a management’s expert, however, if management uses a management’s expert, the auditor determines whether to use the work of an auditor’s expert. An auditor who is not an expert in a field other than accounting or auditing may be able to obtain a sufficient understanding of that field to perform the audit without the use of an auditor’s expert. Ways in which this understanding may be obtained include:
- Experience in auditing entities that require such expertise, for example, an auditor who has not audited in the extractive industry may not have the same level of knowledge and understanding as an auditor who works extensively in this industry;
- Education or professional development in the particular field which may include formal courses;
- Discussion with individuals possessing expertise in the relevant field for the purpose of enhancing the auditor’s own competence to deal with matters in that field;
- Discussion with auditors who have performed engagements in the same or similar industries with the same or similar use of experts for the preparation of a financial report.
While an auditor may have obtained knowledge of a field as described in paragraph 11 of this Guidance Statement, the auditor’s decision on whether to use an auditor’s expert may be influenced by factors included in ASA 620 as well as:
- The nature and significance of the matter, including its complexity;
- The risks of material misstatement;
- The expected nature of procedures to respond to the identified risks, including:
- the auditor’s knowledge and experience with the work of experts in relation to such matters; and
- the availability and extent of alternative sources of audit evidence;
- The extent to which management has used a management’s expert; and
- The management expert’s competence, capabilities and objectivity.
This Guidance Statement does not provide guidance on the auditor’s use of the work of an auditor’s expert. ASA 620 Using the Work of an Auditor’s Expert establishes mandatory requirements and provides application and other explanatory material on using the work of an auditor’s expert as audit evidence.
ASA 315, Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment.
ASA 220 Quality Control for an Audit of a Financial Report and Other Historical Financial Information, paragraph 14.