Why are specialists so special? Using the Work of Audit Specialists
specialist standing out in crowd

Why are specialists so special? Using the Work of Audit Specialists

The 5 Ws of Specialists

Specialists… what’s so “special” about them? Let’s go through the 5Ws as a quick primer!

What is a specialist?

Under Public Company Accounting Oversight Board (PCAOB) auditing standards, a specialist is a person (or firm), employed or engaged by the company (or an audit firm), possessing special skill or knowledge in a particular field other than accounting or auditing.

Who uses a specialist?

A specialist may be used by a company to assist in developing accounting estimates and/or a specialist may be used by an auditor as audit evidence. A specialist may be engaged or employed by a company or an audit firm.

When & Where are specialists used?

Goodwill impairments, environmental remediation contingencies, post-employment obligations, and mineral reserves are just a few accounting estimates that could involve the use of a specialist. These accounting estimates are reassessed frequently during the year – many are reassessed each reporting period, which means a specialist could be used quite often!

Why are we talking about specialists?

When a specialist is utilized, by either a company or auditor, the auditor has specific requirements that must be followed per PCAOB auditing standards and recently these standards have changed.

The use of specialists is becoming even more prevalent as the number and complexity of accounting estimates continue to rise. Auditing accounting estimates consistently ranks in the top 5 audit deficiences noted during PCAOB inspections, with one of the root causes of the deficiencies being an insufficient understanding and review of work done by specialists.

A specialist is being used; what does this mean for an auditor?

Auditors should refer to the various auditing standards based on the type of specialist used – company’s specialist, auditor employed specialist, or auditor-engaged specialist. The image below is a “cheat-sheet” from our Audit Update course that details which auditing standard to reference.

specialist standards reference PowerPoint slide

Auditors' responsibilities when using the work of a company’s specialist

When a company’s specialist is used (engaged or employed by the company), the auditor is required to gain an understanding of the specialist’s work, assess the specialist, and evaluate the resulting work performed by the specialist.

Obtaining an understanding of the specialist’s work includes the data and processes used by the specialist as well as the company’s processes and controls for using the specialist’s work. The specialist’s knowledge, skill, ability, and relationship with the company should be assessed by the auditor. The evaluation of the specialist’s work should include determining if the work provides sufficient appropriate evidence to support the conclusions made by the specialist. While the auditor is not required to reperform the specialist’s work, the auditor should test and evaluate the data, significant assumptions, and methods used in the work. Relevance and reliability are critical when performing an evaluation of the specialist’s work.

Appendix A – Using the Work of a Company’s Specialist as Audit Evidence of AS 1105: Audit Evidence describes the auditor’s requirements when a company’s specialist is used.

Supervising or using the work of an auditor’s specialist

Even though an audit firm has hired or employed the specialist, that doesn’t mean the auditor is off the hook! Appendix A of AS 1201, Supervision of the Audit Engagement and AS 1210, Using the Work of an Auditor-Engaged Specialist both contain new requirements for auditors.

When an auditor-employed specialist is utilized, the supervision requirements in AS 1201 apply, similar to other members of the engagement team, including independence requirements.

When a specialist is engaged by the auditor, the requirements of AS 1210 are to be applied.

Whether the auditor is supervising or using the work of an auditor’s specialist, the auditor’s requirements include:

  • Assigning tasks to and determining independence of an auditor-employed specialist
  • Assessing the knowledge, skill, and ability (KSA) of an auditor-engaged specialist
  • Assessing the objectivity of an auditor-engaged specialist
  • Informing the auditor’s specialist of the work to be performed
  • Determining the extent or review of the work of an auditor’s specialist
  • Evaluating the work of the auditor’s specialist

When are these changes effective?

The amendments to AS 1105 and AS 1201 and the revisions to AS 1210 are all effective for PCAOB audits of financial statements for fiscal years ending on or after December 15, 2020, so this year for calendar year-end audits of public companies.

Closing thoughts

Regardless of the type of specialist utilized, auditors must always assess the knowledge, skill, ability, and objectivity of the specialist. Additionally, the work of the specialist must be reviewed to ensure the proper supervision is applied. The level of auditor work should be commensurate with the complexity of the accounting estimate.

Curious about other recent changes to auditing standards? Our Audit Update discusses recent changes in the auditing world, including both PCAOB and AICPA standards.

About GAAP Dynamics  

We’re a DIFFERENT type of accounting training firm. We don’t think of training as a “tick the box” exercise, but rather an opportunity to empower your people to help them make the right decisions at the right time. Whether it’s U.S. GAAP training, IFRS training, or audit training, we’ve helped thousands of professionals since 2001. Our clients include some of the largest accounting firms and companies in the world. As lifelong learners, we believe training is important. As CPAs, we believe great training is vital to doing your job well and maintaining the public trust. We want to help you understand complex accounting matters and we believe you deserve the best training in the world, regardless of whether you work for a large, multinational company or a small, regional accounting firm. We passionately create high-quality training that we would want to take. This means it is accurate, relevant, engaging, visually appealing, and fun. That’s our brand promise. Want to learn more about how GAAP Dynamics can help you? Let’s talk!


This post is published to spread the love of GAAP and provided for informational purposes only. Although we are CPAs and have made every effort to ensure the factual accuracy of the post as of the date it was published, we are not responsible for your ultimate compliance with accounting or auditing standards and you agree not to hold us responsible for such. In addition, we take no responsibility for updating old posts, but may do so from time to time.

Virtual A&A Update for Accounting Firms
New call-to-action

Comments (0)

Add a Comment

Allowed tags: <b><i><br>Add a new comment:

Ready To Make a Change?

Cookies on the GAAP Dynamics website

To give you the best possible experience, this website uses cookies. By continuing to browse this website you are agreeing to our use of cookies. For more details about cookies and how to manage them, please see our privacy policy.