General Clarification SA 620

GENERAL CLARIFICATION
(GC)–AASB/1/2002 ON SA 620
Standard on Auditing (SA) 620, Using the Work of an
Expert
{The following is the General Clarification (GC)-AASB/1/2002 issued by the
Auditing and Assurance Standards Board of the Institute of Chartered
Accountants of India on Standard on Auditing (SA) 620, “Using the Work of an
Expert.”}
1. Paragraph 12 of SA 620 provide as under:
“12. The appropriateness and reasonableness of assumptions and
methods used and their application are the responsibility of the expert. The
auditor does not have the same expertise and, therefore, cannot always
challenge the expert’s assumptions and methods. However, the auditor
should obtain an understanding of those assumptions and methods to
determine that they are reasonable based on the auditor’s knowledge of the
client’s business and on the results of his audit procedures.”
2. The auditor while verifying the accrued liability for retirement benefits or for
Group Gratuity Schemes has to use the work of an another expert, i.e.,
actuary or the insurer itself. In such a case, the issue to be considered is
whether it is sufficient for the auditor to rely on the certificate given by
insurer or actuary without establishing the reasonableness of the
assumptions made by the actuary or the insurer based on the auditor’s
knowledge of the client’s business. It is clarified that the auditor should,
while using the certificate issued by the actuary or the insurer, obtain an
understanding of the methods used by the actuary or the insurer in
determining the liability and should also judge the appropriateness and
reasonableness of assumptions, for example, with regard to the following:
(i) Rate of Return
(ii) Number of Employees
(iii) Retirement Age
(iv) Salaries
(v) Promotion Policies
(vi) Age of Employees
 Using the Work of an Expert

IV-386 SA 620