Page 71 - CA Final PARAM Digital Book.

Part 4 - SA 620

QNO Agreement (Need for Detailed agreement) Old Course -- (N16E, M21M, M23R)
105.000 TITANIUM CNO—Unique New Course -- (SM23)
Suvrat Ltd had a net worth of INR 2100 crore and Ind AS are applicable to them. The company had various
derivative contracts – options, forward contracts, interest rate swaps etc. which were required to be fair
valued for which company got the fair valuation done through an external third party. The statutory
auditors of the company involved an auditor’s expert to audit valuation of derivatives. Auditor and
auditor’s expert were new to each other i.e., they were working for the first time together but developed
a good bonding during the audit. The auditor did not enter into any formal agreement with the auditor’s
expert. Please advise.
OR
Mr Mohan, an auditor of KTEN Limited wants to use the work of an expert with reference to the Standard
on Auditing state the factors, which suggest the need for detailed and written agreement between the

auditor and the auditor’s expert.
Answer Part I -- Relevant Standards & Laws
▪ SA 620 – “Using Work Of an auditors Expert”

Part II -- Requirements of Relevant Standards & Laws
➢ Factors which suggest the need for detailed and written agreement:
As per SA 620, “Using the work of an Auditor’s Expert”, some of the matters may affect the
level of detail and formality of the agreement between the auditor and the auditor’s
expert, including whether it is appropriate that the agreement be in writing. For example,
the following factors may suggest the need for a more detailed agreement than would
otherwise be the case, or for the agreement to be set out in writing:
Nuclear-DEAL should have detailed agreement as they are C-omplex

• N- The auditor has Not previously used work performed by that expert.
• D- The respective roles or responsibilities of the auditor and the auditor’s
expert are Different from those normally expected.
• E- The greater the Extent of the auditor’s expert’s work, and its
significance in the context of the audit.
• A - The auditor’s expert will have Access to sensitive or confidential entity
information.
• L -Multi-jurisdictional Legal or regulatory requirements apply.
• C-The matter to which the auditor’s expert’s work relates is highly
Complex.
Author’s Note

Nuclear-DEAL should have detailed agreement as they are C-omplex

QNO Agreement With Expert (Matters Covered) Old Course – (N18M, M19R, M19M, SM21, M23R)
105.100 TITANIUM CNO—SA620.120
X Ltd had a net worth of INR 1300 crores because of which Ind AS became applicable to them. The
company had various derivative contracts – options, forward contracts, interest rate swaps etc. which
were required to be fair valued for which company got the fair valuation done through an external third
party. The statutory auditors of the company involved an auditor’s expert to audit valuation of derivatives.
Auditor and auditor’s expert were new to each other i.e. they were working for the first time together but
developed a good bonding during the course of the audit . The auditor did not enter into any formal
agreement with the auditor’s expert. Please advise.
Answer ➢ Matters to be considered in Agreement

The auditor shall agree, in writing when appropriate, on the following matters with the auditor’s
expert:
The nature, scope and objectives of that expert’s work.

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