An auditor is auditing the fair value of a complex derivative instrument held by a nonissuer. The auditor engages an auditor's specialist to assist in evaluating the valuation model. Which of the following is the auditor's responsibility regarding the specialist's findings?

Answer options:

The auditor should accept the specialist's findings as conclusive audit evidence.

The auditor should evaluate the adequacy of the specialist's work, including the relevance and reasonableness of the specialist's findings and assumptions.

The auditor must reference the specialist in the audit opinion to share responsibility.

The auditor should perform the valuation independently to verify the specialist's result.

How to approach this question

Using a Specialist: You are the boss. You hire them, you check their work (adequacy/assumptions), and you take full responsibility.

Full Answer

B.The auditor should evaluate the adequacy of the specialist's work, including the relevance and reasonableness of the specialist's findings and assumptions.✓ Correct

Under AU-C 620, the auditor must evaluate the adequacy of the auditor's specialist's work for the auditor's purposes. This includes evaluating the relevance and reasonableness of findings/conclusions and the significant assumptions/methods used.

Common mistakes

Thinking the specialist takes responsibility (Option A) or that the auditor must re-do the work (Option D).

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