What is the management`s expert and how does the auditor use the management`s expert work?

 


The preparation of a company’s financial statements may require ability in a field other than accounting or auditing. In such situations the company may employ or engage experts in these fields to obtain the necessary expertise for preparing of the financial statements.

Management’s expert is an individual or organization possessing special experience and knowledge in a field other than accounting or auditing, whose work in that field is used by the company to assist in the preparation of the financial statements.

The management`s expert expertise may be needed in the following fields:

·     The valuation of complex financial instruments, land and buildings, plant and machinery, jewelry, works of art, antiques, intangible assets, assets acquired, and liabilities assumed in business combinations and assets that may have been impaired.

·       The actuarial calculation of liabilities associated with insurance contracts or employee benefit plans.

·        The estimation of oil and gas reserves.

·        The valuation of environmental liabilities, and site clean-up costs.

·        The interpretation of contracts, laws and regulations.

·        The analysis of complex or unusual tax compliance issues.

If the company prepares the financial statements using the work of management`s expert the auditor must perform the following procedures:

·        Evaluate the competence, capabilities and objectivity of that expert.

·    Obtain an understanding of the work of that expert (professional or other standards in the expert field, assumptions and methods used).

·     Evaluate the appropriateness of the management’s expert’s work (the relevance and reasonableness of the used significant assumptions and methods, the relevance, completeness, and accuracy of the source data).

ISA 500

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