Auditors are required to understand the client’s industry and business but may not be experts in identifying the quantity and value of certain inventory items. For example, consider observing a physical inventory and testing inventory valua- tion for a client that mines rare gems. In such cases, auditors may use a specialist to assist
in testing the existence and valuation of inventory. Auditing standards provide guidance on whether and how an auditor can rely on a specialist. Search PCAOB auditing standards on the PCAOB website (pcaobus.org) for PCAOB AS 1210 guidance on “Using the Work of
a Specialist” to answer the following questions.
a. List three examples of inventory items for which an auditor may need to use a specialist for testing existence or valuation, or both. How would the auditor use the specialist in each example?
b. What characteristics should the auditor consider to ensure the specialist is qualified?
c. What level of understanding does the auditor need to have regarding the nature of
work performed by the specialist?
d. Does the specialist need to be independent of the client and the auditor?
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