Video: Using the Work of Specialists in an Audit

In this lesson, the use of specialists in an audit is discussed, including examples of various specialists such as actuaries, valuation specialists, industry specialists, tax specialists, engineers, and lawyers. It emphasizes the importance of understanding the methods and assumptions used by specialists and outlining the responsibility of the auditor in reviewing the specialist's work. Additionally, the lesson covers the circumstances where an auditor may refer to a specialist in the audit report, primarily in cases of modified opinions, and stresses that even when referencing a specialist, the auditor maintains full responsibility for the work and opinion.

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Video Transcript

Instructor: Nick Palazzolo

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Using the work of specialists in an audit, here are some examples of specialists who the auditor may work with and whose work the auditor may rely upon in audit. An actuary, if you don't know what an actuary is, this is someone who is incredibly good at math. And these are the people who predict how long you're probably going to live based on your life in terms of pensions and assessing what the pension liability should be, insurance determining what your lifespan should be for the insurance purposes, you know, super morbid but incredibly smart people. Valuation specialists or appraisers, these people are going to help you to determine what the value of an asset should be. Industry specialists, so someone who's really good at construction or really good with cryptocurrency. Tax specialists, you know, if you're an auditor you're probably not a tax specialist, probably bring in someone from there. Engineers, lawyers, very much specialized specialized in their own industry. When the auditor uses the work of a specialist in audit, so if you're auditing the income tax line you'll probably work with a tax specialist. If you're auditing the contingencies and commitments and if they've accrued those items you'll probably talk with a lawyer. So when the auditor uses the work of these specialists, he or she should obtain an understanding of the message and assumptions used by the specialists in order to assess their competence. If your specialist is saying, oh I put a number in a hat and I draw the number and that's what I think this should be, I would say that's not very confident. But if you're looking at the work of the specialist and they're saying, oh here's this complex model, you know, I'm actually taking the time to do

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