Vega Insurance Brokers Ltd. is preparing its financial statements for the year ended 31st March 2026. The company has recognised a material…

As per SA 500, Audit Evidence, when information to be used as audit evidence has been prepared using the work of a management's expert, the auditor shall, to the extent necessary having regard to the significance of that expert's work for the auditor's purposes: 1. Evaluate the competence, capabilities and objectivity of the management's expert; 2. Obtain an understanding of the work of that expert; and 3. Evaluate the appropriateness of the expert's work as audit evidence for the relevant assertion. Evaluation of the appropriateness of the expert's work includes considering the relevance and reasonableness of the expert's findings or conclusions, their consistency with other audit evidence, and the relevance and reasonableness of significant assumptions and methods used. The auditor should also consider the relevance, completeness and accuracy of the source data used by the expert. In the given situation, the incurred-but-not-reported (IBNR) claims reserve is material and involves significant estimation uncertainty and actuarial judgement. Therefore, the work of the actuary is significant to the auditor's purposes. The engagement team cannot rely merely on the fact that the actuary has certified the amount. It is required to evaluate the actuary's competence, capabilities and objectivity, understand the actuarial work performed and evaluate the reasonableness of the assumptions, methods, source data and conclusions. The reporting deadline does not relieve the auditor from complying with SA 500. If the auditor is unable to obtain sufficient appropriate audit evidence regarding the expert's work, appropriate additional audit procedures should be performed, which may include agreeing with management on further action or, where necessary, involving another expert, including the auditor's own expert under SA 620. Conclusion: The engagement team's approach of accepting the certified IBNR figure without the required evaluation is not in accordance with SA 500. The auditor must perform the prescribed evaluation before relying on the actuary's work as sufficient appropriate audit evidence.