Reliance on actuary
This query is : Resolved
24 December 2011
How can we place reliance on actuary without checking the figures and calculations.
Auditing standard (SA-620) says that to place reliance on the experts by performing a basic checking about their qualifications, and comparing estimates with the previous years, i agree!! but my doubt is another standard on auditing (SA-540) was inserted which says to have testing for the fair value estimates.Whether this standard contradicts that other standard to rely on the third party (i.e, Experts) or does it tell the same to just place reliance on experts.Pls Clarify!!
Auditing standard (SA-620) says that to place reliance on the experts by performing a basic checking about their qualifications, and comparing estimates with the previous years, i agree!! but my doubt is another standard on auditing (SA-540) was inserted which says to have testing for the fair value estimates.Whether this standard contradicts that other standard to rely on the third party (i.e, Experts) or does it tell the same to just place reliance on experts.Pls Clarify!!
25 December 2011
Dear Narendra,
It is really nice to see your question.
it is already stated that an auditor is not an expert in all the areas
As per SA200 you can use the work of an expert (subjected to some conditions)
SA620 states the role of an auditor in an estimate is done by an expert
an independent expert in the field of valuation has done the valuation and the auditor has verified the asumption used in the valuation
this statement clearly states the valuation is free from material mistatement
in simple words you have tested the fare value of an estimate buy testing the independence and the assumptions.
so in a way you have also complied with SA540
and there is no contraduction of SA.
It is really nice to see your question.
it is already stated that an auditor is not an expert in all the areas
As per SA200 you can use the work of an expert (subjected to some conditions)
SA620 states the role of an auditor in an estimate is done by an expert
an independent expert in the field of valuation has done the valuation and the auditor has verified the asumption used in the valuation
this statement clearly states the valuation is free from material mistatement
in simple words you have tested the fare value of an estimate buy testing the independence and the assumptions.
so in a way you have also complied with SA540
and there is no contraduction of SA.
Message likes :
1 times
26 December 2011
Dear Mahesh,
Thanks for ur reply.I am satisfied but i have other small doubt to my knowledge while doing audit we dont see the basis of the assumptions(i.e., Demographic and financial assumptions) we just compare whether the assumptions sent by the management are consistent with the assumptions taken by the actuary in the report.My doubt is whether this amounts to verification of the fair value estimate.If it is not testing strategy fraud can prevail in this major area.Pls clarify whether my contention is right or am i thinking in a wrong way.!!!
Thanks for ur reply.I am satisfied but i have other small doubt to my knowledge while doing audit we dont see the basis of the assumptions(i.e., Demographic and financial assumptions) we just compare whether the assumptions sent by the management are consistent with the assumptions taken by the actuary in the report.My doubt is whether this amounts to verification of the fair value estimate.If it is not testing strategy fraud can prevail in this major area.Pls clarify whether my contention is right or am i thinking in a wrong way.!!!
29 December 2011
Dear Narendra,
Usually the demographic assumption taken by actuary are based on industrial standard. that is only if the company cannot arrive at it by the given set of conditions in the company.
if the actuary mention that they have used industrial standard you have to test whether you can justify the use of such standard. if you work out some other data with logical basis you can inform the actuary to change the assumption and arrive at the valuation.
financial assumption are strictly to be audited
you cannot just check the management assumption and the acturial assumption are the same.
you have to audit the same.
Usually the demographic assumption taken by actuary are based on industrial standard. that is only if the company cannot arrive at it by the given set of conditions in the company.
if the actuary mention that they have used industrial standard you have to test whether you can justify the use of such standard. if you work out some other data with logical basis you can inform the actuary to change the assumption and arrive at the valuation.
financial assumption are strictly to be audited
you cannot just check the management assumption and the acturial assumption are the same.
you have to audit the same.
Message likes :
1 times
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Is Aadhar PAN linking required for opening bank account?
- Where to show the RCM on Rent paid to unregistered landlord
- CPC Processing IT Return for AY 2023-24 without recognizing the Taxation Option under New Regime
- Form 26QB for TDS on property
- Payable outstanding for years disallowance
- RCM - commercial rent paid to URP under GST
- GST Annual Returns filing due date
- Legal heir raised refund , but refund issued to the closed account of deceased.
- TDS NUMBER SURRENDER
- Whether still royalty
- Need help with business structure for setting up a new business
- TDS applicability on Service through ECO
- Issue of gst e invoice
- Interchangeable words in accounts
- Adjusted profit/Loss in the case of LLP and Pvt. Ltd.company
- How to adjusted advances given or receipt
- Foreign vendor without PAN unable to to register due to non receipt of OTP on foreign number ?
- 133(6) DIN INVALID format error - ->WHERE TO REPLY 133(6) notice?
- Query for dubts
- Regarding Resignation by Auditor from Pvt. Ltd.
Trending Online Classes
-
Excel Mastery Program
CA Rishabh Pugalia
CAclubindia
