Annual Audit Manual
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3095 Agreeing terms and arrangements with the auditor’s expert
Sep-2016
In This Section
Agreement of matters with the auditor’s expert
Form and content of the agreement
Considerations for agreement between the auditor and an auditor’s expert
CAS Requirement
The auditor shall agree, in writing when appropriate, on the following matters with the auditor’s expert (CAS 620.11):
(a) The nature, scope and objectives of that expert’s work;
(b) The respective roles and responsibilities of the auditor and that expert;
(c) The nature, timing and extent of communication between the auditor and that expert, including the form of any report to be provided by that expert; and
(d) The need for the auditor’s expert to observe confidentiality requirements.
CAS Guidance
The nature, scope and objectives of the auditor’s expert’s work may vary considerably with the circumstances, as may the respective roles and responsibilities of the auditor and the auditor’s expert, and the nature, timing and extent of communication between the auditor and the auditor’s expert. It is therefore required that these matters are agreed between the auditor and the auditor’s expert regardless of whether the expert is an auditor’s external expert or an auditor’s internal expert. (CAS 620.A23)
The matters noted in paragraph 8 may affect the level of detail and formality of the agreement between the auditor and the auditor’s expert, including whether it is appropriate that the agreement be in writing. For example, the following factors may suggest the need for more a detailed agreement than would otherwise be the case, or for the agreement to be set out in writing (CAS 620.A24):
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The auditor’s expert will have access to sensitive or confidential entity information.
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The respective roles or responsibilities of the auditor and the auditor’s expert are different from those normally expected.
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Multi-jurisdictional legal or regulatory requirements apply.
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The matter to which the auditor’s expert’s work relates is highly complex.
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The auditor has not previously used work performed by that expert.
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The greater the extent of the auditor’s expert’s work, and its significance in the context of the audit.
The agreement between the auditor and an auditor’s external expert is often in the form of an engagement letter. The Appendix lists matters that the auditor may consider for inclusion in such an engagement letter, or in any other form of agreement with an auditor’s external expert. (CAS 620.A25)
When there is no written agreement between the auditor and the auditor’s expert, evidence of the agreement may be included in, for example (CAS 620.A26):
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Planning memoranda, or related working papers such as the audit program.
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The policies and procedures of the auditor’s firm’s system of quality management. In the case of an auditor’s internal expert, the firm’s system of quality management may include policies or procedures relating to the expert’s work. The extent of documentation in the auditor’s working papers depends on the nature of such policies or procedures. For example, no documentation may be required in the auditor’s working papers if the auditor’s firm has detailed protocols covering the circumstances in which the work of such an expert is used.
OAG Guidance
Taking into account the required considerations, judgment will be involved in deciding the form and content of the agreement with the auditor’s expert in accordance with OAG Audit 3093.
We typically obtain an agreement in writing when an auditor’s external expert is engaged to assist the teams in a capacity other than advising. The written agreement with the auditor’s external expert will be in the form of a formal letter. In the rare circumstance that the auditor’s external expert refuses to sign a written agreement, we will need to consider whether we are able to proceed with engaging that expert.
Auditor’s internal experts
Consider obtaining a written detailed agreement with an auditor’s internal expert in the following circumstances:
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the work required is other than routine and/or is not covered by standard OAG guidance on how experts will typically be used in such situations;
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the auditor’s internal expert is assisting us in the performance of audit procedures (test of controls or substantive testing) as opposed to only helping us to understand the risk or having a brief consultation on a narrowly defined issue;
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the work is in relation to a significant risk of material misstatement;
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the auditor’s internal expert’s work constitutes a significant part of the audit evidence and there are no alternative sources of audit evidence; and/or
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we have never worked before with that auditor’s internal expert in the particular field.
The written detailed agreement with the auditor’s internal expert may be in the form of a memorandum or email that will be agreed to (and if appropriate signed off) by both the core assurance team and the auditor’s internal expert before the detailed work has begun, and will be included in the audit file.
When there is no need for a written agreement between the auditor and the auditor’s internal expert, consider documenting relevant discussions in the planning section of the audit file.
For matters to consider when agreeing with an auditor’s internal expert, refer also to examples of considerations for agreement between the auditor and an auditor’s external expert as listed in Appendix of CAS 620.
Differences of opinion with auditor’s internal experts
The engagement leader has the overall responsibility for determining the team roles and responsibilities, including those of auditor’s internal experts. If there is a difference of opinion with the decision of the engagement leader as to the level of the auditor’s internal expert’s involvement, refer to the guidance in OAG Audit 3082 for resolving those differences.
CAS Guidance
Nature, scope and objectives of the auditor’s expert’s work
It may often be relevant when agreeing on the nature, scope and objectives of the auditor’s expert’s work to include discussion of any relevant technical performance standards or other professional or industry requirements that the expert will follow. (CAS 620.A27)
Respective roles and responsibilities of the auditor and the auditor’s expert and working papers
Agreement on the respective roles and responsibilities of the auditor and the auditor’s expert may include (CAS 620.A28):
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Whether the auditor or the auditor’s expert will perform detailed testing of source data.
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Consent for the auditor to discuss the auditor’s expert’s findings or conclusions with the entity and others, and to include details of that expert’s findings or conclusions in the basis for a modified opinion in the auditor’s report, if necessary (see paragraph A42).
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Any agreement to inform the auditor’s expert of the auditor’s conclusions concerning that expert’s work.
Agreement on the respective roles and responsibilities of the auditor and the auditor’s expert may also include agreement about access to, and retention of, each other’s working papers. When the auditor’s expert is a member of the engagement team, that expert’s working papers form part of the audit documentation. Subject to any agreement to the contrary, auditor’s external experts’ working papers are their own and do not form part of the audit documentation. (CAS 620.A29)
Communications and reporting
Effective two-way communication facilitates the proper integration of the nature, timing and extent of the auditor’s expert’s procedures with other work on the audit, and appropriate modification of the auditor’s expert’s objectives during the course of the audit. For example, when the work of the auditor’s expert relates to the auditor’s conclusions regarding a significant risk, both a formal written report at the conclusion of that expert’s work, and oral reports as the work progresses, may be appropriate. Identification of specific partners or staff, who will liaise with the auditor’s expert, and procedures for communication between that expert and the entity, assists timely and effective communication, particularly on larger engagements. (CAS 620.A30)
Confidentiality
It is necessary for the confidentiality provisions of relevant ethical requirements that apply to the auditor also to apply to the auditor’s expert. Additional requirements may be imposed by law or regulation. The entity may also have requested that specific confidentiality provisions be agreed with auditor’s external experts. (CAS 620.A31)
Refer to the list of Considerations for Agreement between the Auditor and an Auditor’s External Expert included in the Appendix of CAS 620 for detailed items to consider in an agreement with the auditor’s expert. This list includes matters that the auditor may consider for inclusion in any agreement with an auditor’s external expert. This list is illustrative and is not exhaustive; it is intended only to be a guide. Whether to include particular matters in the agreement depends on the circumstances of the engagement. The list may also be of assistance in considering the matters to be included in an agreement with an auditor’s internal expert.