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I’m going through some questions about audit risk and I encountered a scenario where the valuation of a property could be potentially overstated
As an ‘auditor’s response’, is it acceptable to state that the auditor should rely on an independent expert (like an architect) when giving the auditor’s response?
Thanks 🙂
Welcome to OpenTuition! Could you please ask further questions on my tutor forum https://opentuition.com/forum/ask-acca-tutor-forums/ask-the-tutor-acca-audit-and-assurance-aa-exams (which is where I am supposed to answer students’ queries)
Short answer – NO because
1. It’s a “cop out”
2. There should be other sources of evidence
3. It shows a lack of commercial acumen (a professional skill that you will be expected to demonstrate at the strategic level) because experts cost money, which the client will ultimately have to pay in the audit fee.For more technical detail, I should also add that the response should take into account whether the property is measured under the cost or revaluation model – don’t assume the latter. For example, a property (like any item of PPE) that is be carried at cost less accumulated depreciation may be overstated if it is damaged during the year. Here the auditor could look to a quote to repair the damage (most likely required for an insurance claim) as an estimate for a write-down in value.
Where the property is measured at a revalued amount – and let’s say the revaluation has been performed by the directors or someone internal, the auditor will need to look at the supporting workings, etc – it can’t be a figure plucked out of the air – which might include, for example, “cost per square metre” – for which there should be market data for comparison.
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