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

Comments

Post a Comment

Popular posts from this blog

Why do auditors use assertions?

Image
  Assertions are representations by management that are embodied in the financial statements and used by the auditor to consider the different types of potential misstatements that may occur. Assertions may fall into the following categories: Assertions about classes of transactions and events, and related disclosures, for the period under audit : ·         Occurrence —transactions and events that have been recorded or disclosed have occurred, and such transactions and events are related to the company. ·         Completeness —all transactions and events that should have been recorded have been recorded, and all related disclosures that should have been included in the financial statements have been included.   ·         Accuracy —amounts and other data relating to recorded transactions and events have been recorded appropriately, and related disclosures have been app...
Read more

What is the new International Standard on Auditing for Audits of Financial Statements of Less Complex Entities?

Image
  The International auditing and assurance standards board designed “The International Standard on Auditing for Audits of Financial Statements of Less Complex Entities” which is effective for audits of financial statements of less complex entities for periods Beginning on or after December 15, 2025. The standard is based on the International Standards on Auditing (ISA) and would follow a simplified approach based on risk assessment. The standard will enable auditors to obtain reasonable assurance that financial statements are free from material misstatements, and in an independent audit`s report will be pointed out that the audit is conducted in accordance with the ISA for LCE. The ISA for LCE has the following limitations for using: 1.       Specific classes of entities for which the use of the ISA for LCE is prohibited (described below). 2.       Qualitative characteristics that describe an LCE. Qualitative characteristics rel...
Read more