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Audit risk

The Use of Specialists in Audit Engagements


Auditproo

March 30, 2025

In an increasing complex business environment, auditors frequently encounter situations requiring expertise beyond traditional accounting and auditing knowledge. The use of specialists in audit engagements is governed by International Standard on Auditing (ISA) 620: Using the Work of an Auditor’s Expert, which provides guidance on when and how auditors should engage specialists to obtain sufficient and appropriate audit evidence. Additionally, ISA 300: Planning an Audit of Financial Statements and ISA 315: Identifying and Assessing the Risks of Material Misstatement provide essential guidance on integrating specialists into the audit planning and risk assessment process.

This article explores the considerations, benefits, and challenges of using specialists in audit engagements, with a structured framework to guide CPA practitioners.

 

Integrating Specialists During Audit Planning and Risk Scoping

During the planning phase, auditors must determine whether specialized skills or knowledge are necessary to address risks of material misstatement. ISA 300 emphasizes the need for proper resource allocation, including the involvement of specialists, to ensure audit effectiveness. ISA 315 further requires auditors to assess the complexity of an entity's financial reporting and risk environment, which may necessitate specialist input.

Key steps for integrating specialists in audit planning and risk scoping:

  • Identifying Areas Requiring Specialization: The auditor should assess whether transactions, accounting estimates, or financial instruments require expertise beyond the audit team’s knowledge.
  • Determining the Scope of the Specialist’s Work: Clearly defining the objectives, scope, and deliverables of the specialist’s engagement.
  • Assessing the Impact on the Audit Plan: Specialists’ work should align with the overall audit timeline and risk assessment process.
  • Communicating with Management and Those Charged with Governance: Transparency regarding the involvement of specialists helps manage expectations and ensures collaboration.
  • Documentation of Specialist Use: Auditors must document how the specialist’s work will contribute to obtaining sufficient and appropriate audit evidence as required by ISA 230: Audit Documentation.

 

Considerations When Using an Audit and Accounting Specialist

Auditors must carefully evaluate whether an audit engagement requires specialized skills or knowledge, considering several key factors. The complexity of transactions, such as mergers, acquisitions, or derivatives, may necessitate valuation specialists or legal consultants to ensure accurate financial reporting. Similarly, intricate data flows, where information is sourced from multiple systems and requires detailed reconciliations, may call for IT specialists to assess data integrity. In cases where an entity relies on complex mathematical or statistical models for financial estimates, actuaries or valuation experts can provide crucial insights. Legal professionals may also be required to interpret intricate contractual terms, particularly in revenue recognition and lease agreements, while forensic specialists may be needed to assess related party transactions and uncover undisclosed relationships.

The use of complex financial instruments, such as derivatives and hedging arrangements, often demands the expertise of financial specialists to ensure proper valuation and compliance. Likewise, the presence of special-purpose entities requires forensic or tax specialists to evaluate their substance over form. High-judgment areas, such as impairment assessments and provisions for contingent liabilities, may benefit from industry-specific specialists who understand sectoral risks. Additionally, organizations with complex IT systems, including automated controls, cybersecurity measures, and data migration processes, may require IT auditors to assess their reliability. In some cases, the estimation of non-financial information—such as environmental metrics—necessitates verification by engineers, scientists, or other technical experts. Finally, forensic accountants play a critical role in risk assessment and fraud detection, offering specialized skills to analyze unusual transactions and identify fraudulent financial reporting. By carefully considering these factors, auditors can determine when specialized expertise is necessary to enhance audit quality and ensure compliance with professional standards.

 

Integrating Specialists During Audit Execution

Once the planning phase is complete, specialists must be effectively integrated into the audit execution stage. ISA 500: Audit Evidence and ISA 620 outline the auditor’s responsibility in evaluating the specialist’s work and ensuring its reliability.

Key considerations for execution:

  • Supervision and Coordination: The engagement team must maintain oversight of the specialist’s work, ensuring alignment with audit objectives (ISA 220: Quality Control for an Audit of Financial Statements).
  • Sufficiency and Appropriateness of Evidence: Auditors should assess whether the specialist’s findings provide sufficient and appropriate audit evidence in accordance with ISA 500.
  • Evaluation of Findings and Consistency with Audit Conclusions: The auditor must critically analyze the specialist’s work and assess its impact on the overall audit conclusion.
  • Addressing Differences in Opinion: Any disputes between the audit team and the specialist should be resolved in accordance with firm policies and professional judgment.

 

Planning for the Use of Specialists

Once the need for a specialist has been identified, auditors should establish a structured approach for their engagement. Key planning considerations include:

  • Timing of Involvement: Determining when the specialist’s work is needed in the audit timeline and ensuring alignment with other audit activities.
  • Scope of Work: Defining the specialist’s responsibilities and ensuring their work will provide sufficient and appropriate audit evidence.
  • Integration with the Audit Team: Clarifying reporting lines, collaboration with junior staff, and the extent of their interaction with the audit team.
  • Review of Work Performed: Ensuring that those reviewing the specialist’s work have the necessary expertise to evaluate its adequacy.
  • Nature of Engagement: Determining whether the specialist will conduct substantive audit procedures or serve in an advisory capacity, with ultimate audit responsibility remaining with the engagement team.

 

Merits of Using Specialists

  • Enhanced Audit Quality: Specialists bring deep expertise that strengthens audit conclusions and enhances reliability.
  • Improved Risk Assessment: Engaging experts improves the identification and mitigation of high-risk areas.
  • Regulatory Compliance: Compliance with ISA 620 and other standards ensures audit procedures meet professional requirements.
  • Greater Credibility: The use of specialists increases stakeholder confidence in audit findings.

 

Demerits of Using Specialists

  • Increased Costs: Hiring specialists can be expensive, impacting audit fees and profitability.
  • Complex Coordination: Integrating specialists into the audit process requires effective communication and oversight.
  • Reliance Risk: Excessive dependence on specialists may dilute the audit team’s responsibility.
  • Potential for Disputes: Differences in opinion between the audit team and specialists can arise, requiring resolution mechanisms.

 

Conclusion

The use of specialists in audit engagements is an essential practice for addressing complex and judgment-intensive areas. CPA practitioners should adhere to ISA 620, ISA 300, ISA 315, and ISA 500 to ensure proper engagement, integration, and review of specialists’ work. By effectively leveraging specialized expertise, auditors can enhance the quality of their work, mitigate risks, and maintain compliance with professional standards.

As businesses continue to evolve, CPA practitioners must be proactive in recognizing when specialized skills are necessary and ensure a seamless integration of specialists into the audit process.

Published On: March 30th, 2025 / Categories: Audit risk

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