CH02P5--SA 620

620.2

An auditor’s expert may be either an auditor’s internal or an external expert. Which of the following can not be an auditor’s internal expert? (CNO--SA620.020)

• (a) Partner of the Auditor’s Firm

• (b) Temporary Staff of the Auditor’s Firm

• (c) Permanent Staff of Auditor’s Network Firm

• (d) A Prospective CA, soon to join the Auditor’s Firm as a Partner

620.3

Which among the following is not a factor for determining the necessity to use an auditor’s expert to assist in obtaining sufficient appropriate audit evidence?

(CNO--SA620.060)

• (a) The use of a management’s expert by the management in preparing the financial statements.

• (b) The presence of an internal audit function and verification of the subject matter by them.

• (c) The nature and significance of matter including its complexity.

• (d) The risk of material misstatement in the matter.

620.1

X Ltd is in the business of trading of industrial equipments. The Company’s operations are based out of India

and Germany. For the purpose of hedge, the company has taken forward contracts. The Company is Phase 1

company as per the requirements of Ind AS and hence forward contracts have been fair valued for the purpose

of preparation of financial statements. The Company also got its property, plant and equipment fair valued.

The Company has shown its fair valuation reports in respect of above items to the auditors. What should be

the responsibility of the auditors in this case? (CNO--SA620.160)

• (a) The auditor may refer to the work of the valuer in his report containing an unmodified opinion and

  accordingly reduce the his responsibility for the audit opinion

• (b) The auditor may refer to the work of the valuer in his report for forward contracts but not for property,

  plant and equipment, containing an unmodified opinion and accordingly reduce his responsibility for the

  audit opinion.

• (c) The auditor may refer to the work of the valuer in his report for property, plant and equipment but not for

  forward contracts, containing an unmodified opinion and accordingly reduce his responsibility for the audit

  opinion.

• (d) The auditor may involve his own expert for the purpose of audit of fair valuation of forward contracts and

  property, plant and equipment. But in any case he cannot reduce his responsibility for the audit opinion

  by referring to the work of the valuer in his report.

Incs.14.4

Bhuvan & Co. Chartered Accountants, mainly into statutory audit and tax audit, is now exploring the areas of due diligence and investigation assignments. In this regard, the following events may be noted:

Further, Bhu van & Co. has also received an order in writing from the Central Government, in respect of one of its clients, to carry out an investigation under section 210 of the Companies Act 2013. With respect to this investigation, Bhuvan & Co. is contemplating on the getting the assistance of an expert with respect to certain matters.

Can Bhuvan & Co. take the assistance of experts in pursuing the investigation? Choose the correct reasoning from the below?

(CNO--SA620.060)

• (a) Yes, Bhuvan & Co. should consider whether assistance of

  other experts like engineers, lawyers, etc. is necessary in

  the interest of a comprehensive and full proof

  examination of documents and information.

• (b) Yes, SA 620 - Using the work of experts, has a specific

  paragraph on using an expert's assistance for

  investigation.

• (c) No, the objective of SA 620 is to use the work of expert

  for audit of historical financial statements and not for

  investigation purposes.

• (d) No, since investigation is analytical in nature and requires

  a thorough mind, capable of observing, collecting and

  evaluating facts, the usage of an expert will hinder the

  independence of the investigator

As per the expert appointed by the Auditor, the exposure for the company can be ` 20 lacs as in past in

similar cases, the judgement was delivered against the company. However, the management of ABC

Limited was of the view that when management has already hired an expert, then there is no need to

hire another expert by the auditor. Seeking your advice, kindly guide the auditor by selecting the below

option, and what next steps should perform.

(CNO--SA620.060)

• (a) The auditor shall design and perform audit procedures in order to identify litigation and claims

  involving the entity which may give rise to a risk of material misstatement. Also, if expertise in a

  field other than accounting or auditing is necessary to obtain sufficient appropriate audit evidence,

  the auditor shall determine whether to use the work of an auditor’s expert. Hence auditor can

  appoint his expert to validate the assumption and estimate performed by the management’s expert.

• (b) The auditor shall rely upon the work performed by the management’s expert. Management expert

  will be equivalent to the auditor’s expert and hence no other expert is required to be appointed.

• (c) The auditor shall not rely upon the management’s expert unless he evaluates the adequacy of the

  expert’s work for the auditor’s purposes, including the relevance and reasonableness of that

  expert’s findings or conclusions, and their consistency with other audit evidence. Although in the

  current case, there is no consonance between the management’s expert’s findings and other audit

  evidence, the auditor is still required to rely upon the findings of the management’s expert.

• (d) The auditor shall rely upon the management’s expert without evaluating the adequacy of the

  expert’s work for the auditor’s purposes, including the relevance and reasonableness of that

  expert’s findings or conclusions, and their consistency with other audit evidence. Hence auditor is

  required to rely upon the findings of management’s expert in the current case.

Incs.42.1

Chartered Accountant Firms - Tink & Co., Llyods & Co. and Manohar &Co., respectively, were appointed as the joint auditors for conducting the statutory audit for the financial year 2020-21 of Anitya Ltd.

 

They were having difference of opinion with regards to following

points:-

"Manohar & Co. wanted to refer to the work of the auditor’s expert, Mr. Tanmay in the audit report but the other joint auditors were not agreeing on the same as such reference was not relevant to an understanding in the final audit opinion and also it was not required by any statute."

Whether the opinion of Manohar & Co. for referring the work of the auditor’s expert, Mr. Tanmay in the audit report, can be considered as valid?

(CNO--SA620.160)

• (a) No, as such reference was not relevant to an

  understanding in the final audit opinion and also it was

  not required by any law or regulation.

• (b) Yes, such a reference in the auditor’s opinion was

  relevant to the understanding of the users of the

  financial statement.

• (c) No, as such reference was not required by any law or

  regulation.

• (d) Yes, if such reference was relevant to any ‘key audit

  matter’ as per SA 701 even though it was not required

  by any law or regulation.