| A96. | In planning the audit, the auditor is required to ascertain the nature, timing and extent of resources necessary to perform the audit engagement.20 This may include, as necessary, the involvement of those with specialized skills or knowledge. In addition, ISA (UK and Ireland) 220 requires the engagement partner to be satisfied that the engagement team, and any auditor's external experts who are not part of the engagement team, collectively have the appropriate competence and capabilities to perform the audit engagement.21 During the course of the audit of accounting estimates the auditor may identify, in light of the experience of the auditor and the circumstances of the engagement, the need for specialized skills or knowledge to be applied in relation to one or more aspects of the accounting estimates. |
| A97. | Matters that may affect the auditor's consideration of whether specialized skills or knowledge is required include, for example: |
| The nature of the underlying asset, liability or component of equity in a particular business or industry (for example, mineral deposits, agricultural assets, complex financial instruments). |
| A high degree of estimation uncertainty. |
| Complex calculations or specialized models are involved, for example, when estimating fair values when there is no observable market. |
| The complexity of the requirements of the applicable financial reporting framework relevant to accounting estimates, including whether there are areas known to be subject to differing interpretation or practice is inconsistent or developing. |
| The procedures the auditor intends to undertake in responding to assessed risks. |
| A98. | For the majority of accounting estimates, even when there is estimation uncertainty, it is unlikely that specialized skills or knowledge will be required. For example, it is unlikely that specialized skills or knowledge would be necessary for an auditor to evaluate an allowance for doubtful accounts. |
| A99. | However, the auditor may not possess the specialized skills or knowledge required when the matter involved is in a field other than accounting or auditing and may need to obtain it from an auditor's expert. ISA (UK and Ireland) 62022 establishes requirements and provides guidance in determining the need to employ or engage an auditor's expert and the auditor's responsibilities when using the work of an auditor's expert. |
| A100. | Further, in some cases, the auditor may conclude that it is necessary to obtain specialized skills or knowledge related to specific areas of accounting or auditing. Individuals with such skills or knowledge may be employed by the auditor's firm or engaged from an external organization outside of the auditor's firm. Where such individuals perform audit procedures on the engagement, they are part of the engagement team and accordingly, they are subject to the requirements in ISA (UK and Ireland) 220. |
| A101. | Depending on the auditor's understanding and experience of working with the auditor's expert or those other individuals with specialized skills or knowledge, the auditor may consider it appropriate to discuss matters such as the requirements of the applicable financial reporting framework with the individuals involved to establish that their work is relevant for audit purposes. |
| 20 ISA (UK and Ireland) 300, "Planning an Audit of Financial Statements," paragraph 8(e). |
| 21 ISA (UK and Ireland) 220, "Quality Control for an Audit of Financial Statements," paragraph 14. |
| 22 ISA (UK and Ireland) 620, "Using the Work of an Auditor's Expert." |
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