Why to use the work of an expert in the Internal audit?

Standards on Internal Audit (SIA) 16: Using the work of an Expert

The sixteenth standard of the Standards on Internal Audit states the regulatory effects of using the work of an expert for the Internal Audit. The contents of SIA 16 are as follows-

  1. Introduction
  2. Need to use work of Expert
  3. Skills and Competence of Expert
  4. Evaluating the work of an Expert
  5. Disclosure

To get a clearer picture of how SIA 16 is applied or how the work and skills of an expert are used during the whole internal audit process, it is necessary to understand the above stated contents. This is as follows-

  1. Introduction: The standard on Internal Audit 16 or SIA 16 states the following-
  • An “expert” is a person or firm or association of persons, who possess special skills, knowledge, expertise and experience in a relevant particular field or area.
  • If the inernal audit team of an organization does not possess the required knowledge or skill then the company can appoint an expert in the field and use their skills.
  • Expert has to be engaged and appointed by the governance body and the senior management of the company.
  1. Need to use work of Expert: Whenever the requirement for using the experts work arises, the following factors must be considered by the auditor while applying SIA 16-
  • Risks of making errors and irregularities
  • Extent of the availabilty of the Internal Audit Evidence
  • Materiality of the examined item
  • Nature of the transactions made
  • Complexity of the transactions made
  1. Skills and Competence of Expert: The expert as per SIA 16 must be skilled and competent and must possess the following qualities-
  • His/ her reputation must be valid in the relevant discipline and area
  • He/ she must have professional qualifications and skills
  • He/ she must have appropriate membership in the the respective body or institution of the profession
  • He/ she must possess specific experience about the industry in which the entity operates conducting or having the internal audit
  1. Evaluating the work of an Expert: While evaluating the work of the expert, the following must be considered-
  • The objectives and goals of the work
  • Scope of the work
  • Access to the records and data
  • Access to the physical and personnel properties of the work
  • Confidentiality of the work of the expert
  • Confidentiality of the the information by the auditor that was used by the xpert
  • Relationship between the expert and the auditee
  • Ownership of the documentation and working papers related to engagement
  • Custody of such papers and documents
  • Verification of the source of the used data
  • Consideration of the assumptions made
  • Methods and procedures used to obtain results and conclusions
  1. Disclosure: As per SIA 16 some information are to be disclosed and some of them are not required to be made. These include the following-
  • The work of the expert is not required to be disclosed in the report or documents.
  • The work is diclosed only when it is considered to be beneficial for the readers. But this must be done only after taking the prior consent of the expert before publishing the work.
  • The assumptions, broad methodologies and the conclusion made by the expert must be outlined and highlighted well enough.
Author: Anil Agrawal
EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or anil@ezybizindia.in.