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Auditing Experts

There is an increasing focus from regulators and file reviewers on how auditors are using and assessing the work of others in the course of their audits.  In particular, the approach to using experts, and service organisations, is often not handled as well as it might be.  This blog is going to examine a few of the basic principles to consider when auditing experts.

Using experts

Broadly, there are 3 main themes that arise from file review issues with regards use of experts:

  1. When experts are used, has the auditor exercised sufficient scepticism in their work?
  2. Has the auditor fully documented their thought process?
  3. Should auditors be making more use of experts?

Let’s briefly look at each of these issues in turn.

When experts are used, has the auditor exercised sufficient scepticism in their work?

Auditors might look to place reliance on work performed by management-appointed experts, and/or they might look to their own auditor-appointed experts.  Broadly speaking, the requirements are the same, containing 3 elements:

  1. Consider independence. This is usually quite straightforward, but take care when clients use “internal experts”.
  2. Consider competence. Again, this is usually quite straightforward, although more will be needed than a cursory review of the expert’s website! 
  3. Review the work performed by the expert and evaluate its adequacy for audit purposes. This is where the auditor really needs to get stuck in and where professional scepticism becomes critical to the auditor’s conclusions.


Has the auditor fully documented their thought process?

Based on file review experience, auditors tend to be okay at documenting the independence and competence stuff – although of course, it’s best not to get complacent with this.  However, it tends to be the review of work performed that doesn’t always quite hit the mark.  It is simply not enough to put a copy of the expert’s report on file.

Key to good documentation will be to demonstrate a robust consideration of the purpose of the expert in the context of the audit (including assertion risks addressed by their work), an understanding of the basis for any calculations performed by the expert (for example, notes of any discussions held with the expert), and to identify and critique the key assumptions used (for example with reference to 3rd party data if available).


Should auditors be making more use of experts?

As the world of business becomes increasingly complex (new technologies, new ways of transacting, etc.), the worlds of accounting, finance and audit follow suit.  In such a world, auditors cannot stand still in believing that what worked for them decades ago will still work today. 

While auditors are brought up to have a broad range of business skills and accounting understanding, they need to be ready to accept their knowledge shortcomings.  And perhaps these shortcomings arise more frequently than many auditors would care to admit.  When auditors are unable to obtain sufficient audit evidence from their own knowledge and understanding, they should consider turning to an expert for help.

One of the most common areas where auditors may need help is with valuations.  This might be valuations of investments or property or derivatives or (whisper it) even stock.  It all comes down to complexity. 

If you’re looking at a listed investment or a fairly “standard” commercial property or a basic futures contract, it is likely that the auditor will be able to obtain sufficient evidence from their own understanding, and reference to publicly available data.

But what if it’s an unlisted investment valued using a specialist model, or a unique commercial property with no direct comparators, or a bespoke option contract?  In these circumstances, the auditor is unlikely to be able to obtain sufficient evidence on their own.



Auditors are often reluctant to embrace the idea of using auditor-appointed experts.  Usually, the concern is one of additional cost, which they may fear cannot be passed on to the client.  However, it is important to remember that ISQM (UK) 1 and ISA (UK) 220 do not allow commercial considerations to interfere with audit quality.  And so, auditors must be open to using these avenues when they will be the best, or only, way to obtain sufficient, appropriate audit evidence.

As is so often the case, much of the auditor’s battle is also with ensuring sufficient documentation is on file.  When considering the extent to which experts will be relied upon during an audit, it is critical to document thoroughly the thought process and conclusions reached.

Join James Charlton for a CPD Bites session on Auditing Experts and Service Organisations, from 12:30 to 1:30 on 19 June, where he will discuss common pitfalls and highlight good practice, using practical examples.

James Charlton, June 2024

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