MNO Ltd., at its annual general meeting, appointed Mr. M, Mr. N, and Mr. O as joint auditors to conduct the audit for the financial year 2024-25.…

As per SA 620 “Using the Work of an Auditor's Expert”, the expertise of an expert may be required in the valuation of complex financial instruments, land and buildings, plant and machinery, jewelry, works of art, antiques, intangible assets, assets acquired and liabilities assumed in business combinations and assets that may have been impaired etc., however, the auditor has sole responsibility for the audit opinion expressed, and that responsibility is not reduced by the auditor's use of the work of an auditor's expert. The auditor shall evaluate the adequacy of the auditor's expert's work for the auditor's purposes, including the relevance and reasonableness of that expert's findings or conclusions, and their consistency with other audit evidence as per SA 500. Further, in view of SA 620, if the expert's work involves use of significant assumptions and methods, then the relevance and reasonableness of those assumptions and methods must be ensured by the auditor and if the expert's work involves the use of source data that is significant to that expert's work, the relevance, completeness, and accuracy of that source data in the circumstances must be verified by the auditor. In the instant case, Mr. M, Mr. N and Mr. O, jointly appointed as auditors of MNO Ltd., referred their own known engineer for valuation of the newly constructed infrastructure project. Engineers are an auditor's expert as per SA 620. Mr. N's referred Engineer has provided the valuation report, which was later found faulty. Further, Mr. O is not in agreement with this report, therefore, he submitted a separate audit report specifically for such a valuation. In such a situation, it was the duty of Mr. M, Mr. N and Mr. O, before using the valuation report provided by engineer, to ensure the relevance and reasonableness of assumptions and methods used. They were also required to examine the relevance, completeness and accuracy of source data used for such a report before expressing their opinion. Mr. M and Mr. N will be held responsible for gross negligence and using such faulty report without examining the adequacy of expert engineer's work whereas Mr. O will not be held liable for the same due to separate opinion expressed by him.