External Auditors' Evaluation of a Management's Expert's Credibility: Evidence from Australia

20 Pages Posted: 23 May 2020

See all articles by Prerana Agrawal

Prerana Agrawal

University of Western Australia

Ann Tarca

University of Western Australia

David Woodliff

affiliation not provided to SSRN

Date Written: March 2020

Abstract

The Australian Securities and Investments Commission (ASIC) has concerns that auditors are not adequately evaluating the reliability of the work of management's experts (MEs). We interviewed nine experienced auditors to understand how auditors evaluate MEs. We observe that some factors specified by auditing standards, such as an ME's competency in accounting standards, geographical location of the subject matter or the ME, and the sourcing of an ME play a minor role in an auditor's evaluation of an ME's credibility. In contrast, the reputation of an ME's firm is a key determinant. Auditors corroborate information from multiple sources, but verify only the ME's professional qualification. We identify three potential reasons for the ASIC's concerns: “Experts are considered cognitive authorities,” “Documentation is the key,” and “Move from a risk‐based approach to a checklist approach.”

Keywords: Interview Data, Audit Evidence, Audit Judgment, Audit Quality, Auditing Standards, Auditors' Reliance on the Work of Experts, Documentation, Regulation, Source Credibility

Suggested Citation

Agrawal, Prerana and Tarca, Ann and Woodliff, David, External Auditors' Evaluation of a Management's Expert's Credibility: Evidence from Australia (March 2020). International Journal of Auditing, Vol. 24, Issue 1, pp. 90-109, 2020, Available at SSRN: https://ssrn.com/abstract=3602856 or http://dx.doi.org/10.1111/ijau.12181

Prerana Agrawal (Contact Author)

University of Western Australia ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia
08 6488 2099 (Phone)
08 6488 1047 (Fax)

Ann Tarca

University of Western Australia ( email )

Business School
35 Stirling Highway
Crawley WA 6009
Australia
+61 8 6488 3868 (Phone)
+61 8 6488 1047 (Fax)

David Woodliff

affiliation not provided to SSRN

No Address Available

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