I am auditing the books of a banking company. In their books, I see that the bank has advanced a lo…
I am auditing the books of a banking company.
In their books, I see that the bank has advanced a loan for the purchase of machinery. But this loan has been sanctioned on the basis of valuation report which was prepared by a Civil Engineer.
Should I approve this action taken by the bank? Please Justify your answer.
Yes, you need to consider the valuation report given by the Civil Engineer to the bank.
The Auditor while considering advances granted by bank for purchase of machinery has to consider valuation report given by civil engineer to the bank. But only to the extent necessary, having regard to the significance of his work for the your auditing purposes.
As an auditor, you need to, to the extent necessary:
- Evaluate the competence, capabilities and objectivity of that expert;
- Obtain an understanding of the work of that expert; and
- Evaluate the appropriateness of that expert’s work as audit evidence for the relevant assertion.
However, if it appears that civil engineer cannot be considered as an expert for valuation of machinery, you should insert on other analytical procedures to confirm value of machinery. Even after this, if you not satisfied, you should give qualified opinion.
