(b) Reliance on the work of an independent valuer
ISA 500 Audit Evidence requires auditors to evaluate the competence, capabilities including expertise and objectivity of a management expert.
This would include consideration of the qualifications of the valuer and assessment of whether they were members of any professional body or industry association.
In addition, the auditor should meet with the expert and discuss with them their relevant expertise; in particular whether they have valued similar properties to Minnie Co in the past. Also consider whether they understand the accounting requirements of IAS 16 Property, Plant and Equipment in relation to valuations.
The expert’s independence should be ascertained, with potential threats such as undue reliance on Minnie Co or a self-interest threat such as share ownership considered.
The valuation should then be evaluated. The assumptions used should be carefully reviewed and compared to previous revaluations at Minnie Co. These assumptions should be discussed with both management and the valuer to understand where the misstatement has arisen.
In order to correct the misstatement, it might be necessary for the valuer to undertake further work and this should be agreed. Daffy & Co would not be able to state in their audit report that they had relied on an expert for the property valuation.
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