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John Selwoods audit clinic

In this edition, John answers some of the questions he’s been asked during the faculty roadshow.


I am a little confused as to the difference between auditors’ experts and management’s experts. Is there a difference, from an audit perspective? Would you ever find both being used at the same time?


I could refer you to the relevant International Standards on Auditing (ISAs) for detailed definitions and guidance; and after you have read my response, you may want to revisit ISA 500 Audit Evidence and ISA 620 Using the Work of an Auditor’s Expert. Meanwhile, let’s start with some basics. Management’s experts are either employees of the entity or third parties appointed by management. Auditors’ experts are appointed by the auditor.

Typically experts are used for accounting estimates such as valuations of fixed or intangible assets. Setting aside the fact that ISAs deal differently with management’s and auditors’ experts, the main difference is how they are appointed and consequently who they report to. Evidence from auditors’ experts tends to be better because the auditors’ have instructed the expert themselves which helps to ensure that the expert is looking at the issue from the right accounting perspective; and the auditors’ expert should not be influenced by management, which is often a major issue with management’s experts, as they may be more likely (than an auditor’s expert) to give the answer that management want.

Auditors might use evidence from management’s experts when the auditors are capable of understanding the relevant technical issues. This means that the auditors can evaluate whether the estimates produced by management’s experts have been properly made.

However, when the specialist areas that an expert is dealing with are beyond the auditors’ ability to understand the issues (which may be the case with some technology assets, for example) the auditors might appoint their own expert to help them evaluate how management’s expert has done their work.

Again the auditors cannot delegate their responsibility to obtain sufficient appropriate evidence to a third party, even if they are an expert. Using their own expert allows the auditors to get more impartial advice on the issues. If after using management’s and auditors’ experts the auditors are still unable to obtain sufficient appropriate evidence on a particular accounting estimate, which should be very rare, the auditors will need to consider the impact on their audit opinion.

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