STANDARD 620
USING THE WORK OF AN EXPERT
(Issued in pursuance of the Minister of Finance Decision No. 03/2005/QD-BTC
dated 18 January 2005)
General
- The purpose of this Vietnamese Standard on Auditing (VSA) is to establish standards and provide guidance on using the work of an expert as audit evidence for a financial statement audit.
- When using the work performed by an expert in a financial statement audit, the auditor and the audit firm should obtain sufficient appropriate audit evidence that such work is adequate for the purposes of the audit.
- This VSA applies to audits of financial statements and also applies to an audit of other financial information and related services rendered by the audit firm.
The auditor and the audit firm should comply with this VSA in using the work of an expert during an audit of financial statements.
It is expected that the audited entity and users of the audit report should possess essential knowledge of this VSA in working with the auditor and audit firm and in dealing with the relations in using the work of an expert during an audit of financial statements.
In this VSA, the following terms have the meaning attributed below:
- Expert means a person or firm possessing special skill, knowledge and experience in a particular field other than accounting and auditing.
- An expert may be:
- engaged by the entity;
- engaged by the audit firm; or
- employed by the entity;
- employed by the audit firm, or
- an organization or individual other than employed by the entity and the audit firm.
contents of the vsa
Determining the Need to Use the Work of an Expert
- During the audit, the auditor and the audit firm may need to obtain audit evidence in the form of reports, opinions, valuations and statements of an expert. Examples are:
- Valuations of certain types of assets, for example, land and buildings, plant and machinery, works of art, and precious stones.
- Determination of the remaining useful life of machinery and equipment
- Determination of quantities or physical condition of assets, for example, minerals stored in stockpiles, underground mineral and petroleum reserves.
- Determination of amounts using specialized techniques or methods, for example, an actuarial valuation.
- The measurement of work completed and to be completed on contracts in progress.
- Legal opinions concerning interpretations of agreements, statutes and regulations.
- When determining the need to use the work of an expert, the auditor and the audit firm would consider:
a) the materiality of the financial statement item being considered;
b) the risk of misstatement based on the nature and complexity of the matter being considered; and
c) the quantity and quality of other audit evidence available.
Competence and Objectivity of the Expert
- When planning to use the work of an expert, the auditor and the audit firm should assess the professional competence of the expert. This will involve considering the expert’s:
a) professional certification or licensing by, or membership in, an appropriate professional body; and
b) experience and reputation in the field in which the auditor is seeking audit evidence.
- The auditor and the audit firm should assess the objectivity of the expert.
The risk that an expert’s objectivity will be impaired increases when the expert is:
- employed by the entity or the audit firm, or
- related to the entity in financial terms, such as having an investment, share capital or lending; or family relations, such as being a parent, spouse, child, sibling, etc of the management members, including the chief accountant).
- If the auditor is concerned regarding the competence or objectivity of the expert, the auditor needs to discuss any reservations with management and consider whether sufficient appropriate audit evidence can be obtained concerning the work of an expert. The auditor and the audit firm may need to undertake additional audit procedures or seek audit evidence from another expert.
Scope of the Expert’s Work
- The auditor and the audit firm should obtain sufficient appropriate audit evidence that the scope of the expert’s work is adequate for the purposes of the audit. Audit evidence may be obtained through a review of the terms of reference which are often set out in written instructions from the entity to the expert. Such instructions to the expert may cover matters such as:
- The objectives and scope of the expert’s work.
- A general outline as to the specific matters the auditor expects the expert’s report to cover.
- The intended use by the auditor and the audit firm of the expert’s work, including the possible communication to third parties of the expert’s identity and extent of involvement.
- The extent of the expert’s access to appropriate records and files.
- Clarification of the expert’s relationship with the entity, if any.
- Confidentiality of the entity’s information.
- Information regarding the assumptions and methods intended to be used by the expert and their consistency with those used in prior periods.
In the event that these matters are not clearly set out in written instructions to the expert, the auditor may need to communicate with the expert directly to obtain audit evidence in this regard.
Assessing the Work of the Expert
- The auditor and the audit firm should assess the appropriateness of the expert’s work as audit evidence regarding the financial statement assertion being considered. This will involve assessment of whether the substance of the expert’s findings is properly reflected in the financial statements or supports the financial statement assertions, and consideration of:
- Source data used.
- Assumptions and methods used and their consistency with prior periods.
- Results of the expert’s work in the light of the auditor’s overall knowledge of the business and of the results of other audit procedures.
- When considering whether the expert has used source data which is appropriate in the circumstances, the auditor and the audit firm would consider the following procedures:
- making inquiries regarding any procedures undertaken by the expert to establish whether the source data is sufficient, relevant and reliable; and
- reviewing or testing the data used by the expert.
- The appropriateness and reasonableness of assumptions and methods used and their application are the responsibility of the expert. The auditor and the audit firm do not have the same expertise and, therefore, cannot always challenge the expert’s assumptions and methods. However, the auditor and the audit firm will need to obtain an understanding of the assumptions and methods used and to consider whether they are appropriate and reasonable, based on the auditor’s knowledge of the business and the results of other audit procedures.
- If the results of the expert’s work do not provide sufficient appropriate audit evidence or if the results are not consistent with other audit evidence, the auditor and the audit firm should resolve the matter. This may involve discussions with the entity and the expert, applying additional procedures, including possibly engaging another expert, or modifying the audit report.
Reference to an Expert in the Auditor’s Report
- When issuing an unmodified audit report, the auditor should not refer to the work of an expert. Such a reference might be misunderstood to be a qualification of the auditor’s opinion or a division of responsibility, neither of which is intended.
If, as a result of the work of an expert, the auditor and the audit firm decide to issue a modified auditor’s report, in some circumstances it may be appropriate, in explaining the nature of the modification, to refer to or describe the work of the expert (including the identity of the expert and the extent of the expert’s involvement). In these circumstances, the auditor and the audit firm would obtain the permission of the expert before making such a reference. If permission is refused and the auditor and the audit firm believe a reference is necessary, the auditor may need to seek legal advice.