Audit in Specialized Industry

Not rare

Specialized does not mean uncommon; it means the industry has distinct audit considerations.

Not unusual

The activity may be ordinary, but its reporting model or controls may be industry-specific.

Standards-driven

It follows specific financial reporting standards and disclosure expectations.

Policy-specific

It has established accounting policies that affect measurement, recognition, and evidence

Example of Spec. Ind.: Asset-heavy or operational complexity

Ag.Mi.Pe.Po.Te

Example of Spec. Ind.: Regulatory or Servicec Complexity

Bank.In.Air.Ed.Non

Core Design Logic

1) competence

2) planning

3) use of experts

competence

Can the firm and engagement team perform the specialized-industry audit?

audit planning

How do industry risks change material misstatement assessment and procedures?

reliance on experts

When expertise is needed, how does the auditor evaluate and use specialist work?

PSQC 1

The firm should comply with ___________ and maintain an engagement-quality mindset. Audit team should be familiar with the specialized industry

competence

a precondition for credible risk assessment and audit response

compliance

The firm and personnel comply with professional standards, legal requirements, and regulatory requirements.

appropriate reports

Reports issued by the firm or engagement partners are appropriate in the circumstances.

How the auditor builds competence: Skill base

Gain the necessary skills and knowledge for the industry

How the auditor builds competence: experience

Understand regulatory or reportorial requirements that shape the audit

How the auditor builds competence: training

Undertake specific training where knowledge gaps exist

audit planning

Industry knowledge changes the lens, but it does not replace the normal audit approach

planing specialized audits

Identification of the risk of material misstatement in a specialized industry should be approached in the same way as any other audit

industry-specific risks

Plan for balances, transactions, estimates, and evidence that are unique to the sector

normal balances

do not lose sight of routine balances and transactions that still require audit attention

resources the audit team may need:

resources, briefing notes, technical guidance

resources

Additional references or support materials available to the engagement team.

briefing notes

Concise guidance that orients team members to industry risks and procedures.

technical guidance

Internal guidance on applying financial reporting standards in the sector

reliance on experts

Specialist evidence can strengthen the audit, but responsibility remains with the auditor

PSA 620

PSA (???): Using the work of an auditor’s expert (eaa)

Evaluate

objectivity, competence, and capabilities of the auditor’s expert

assess

the relevance and adequacy of the expert’s findings or conclusions.

avoid

over-reliance; specialized nature does not transfer audit responsibility to the expert