Answer: The general circumstance for retaining outside experts is where the auditor requires a special skill or knowledge outside of accounting or auditing, the auditors feel they do not have the level of expertise, or they may want an additional opinion. PCAOB interim Using the Work of a Specialist provides guidance and recognizes that auditors are not expected to be experts in all areas, auditors may encounter material matters which are complex or subjective, and an auditor may use the work of a specialist as evidential matter to evaluate financial statement assertions (PCAOB AU 336, 2010). In the case of auditing pensions, the auditors would most likely use an actuary as a specialist as the auditors would not be expected to have that level of expertise. The actuary would be knowledgeable of the entire pension development process and be able to more quickly comprehend the nuances of the actuarial assumptions and mechanics of the calculations. For example, some of the tasks that the actuary would be involved with the company on for pensions includes the measurement of pension obligations, assignment of plan obligations to time periods, development of a cost allocation procedure, development of a contribution allocation procedure, determination of types and levels of benefits, projection of pension obligations, projection of plan costs or contributions (AAA, 2010). Much of the financial impact of pensions is based on going from current known data (number employees, salaries, etc.) through a number of assumptions (how many years work, how many years collect a pension, mortality rates, what rate able to invest funds at, etc.) to develop the most likely funding needs over time to provide the retirement benefits as agreed to cover the pension expenses. Outside of determining the current employees, salaries, etc., almost everything else is an assumption. How do we make the most appropriate and best assumption to ensure having dollars available in the future? How much do we need to put aside now that will grow and cover the pension requirements? This is where the audit firm should employ an actuary to examine the actuarial-type assumptions made by the company on its employees and current retirees to see if they are reasonable assumptions given the company’s data. The actuary would be able to help examine the pension plan assets, the investments, the effective earning rates from the investments (in comparison to the discount rate being used), the projected pension expenses, and the resultant pension plan funding situation. The actuary’s review should be able to assist the auditor in identifying potential issue areas for the auditor’s further examination. Solution Answer: The general circumstance for retaining outside experts is where the auditor requires a special skill or knowledge outside of accounting or auditing, the auditors feel they do not have the level of expertise, or they may want an additional opinion. PCAOB interim Using the Work of a S.

1. Answer: The general circumstance for retaining outside experts is where the auditor requires a
special skill or knowledge outside of accounting or auditing, the auditors feel they do not have
the level of expertise, or they may want an additional opinion. PCAOB interim Using the Work
of a Specialist provides guidance and recognizes that auditors are not expected to be experts in
all areas, auditors may encounter material matters which are complex or subjective, and an
auditor may use the work of a specialist as evidential matter to evaluate financial statement
assertions (PCAOB AU 336, 2010).
In the case of auditing pensions, the auditors would most likely use an actuary as a specialist as
the auditors would not be expected to have that level of expertise. The actuary would be
knowledgeable of the entire pension development process and be able to more quickly
comprehend the nuances of the actuarial assumptions and mechanics of the calculations. For
example, some of the tasks that the actuary would be involved with the company on for pensions
includes the measurement of pension obligations, assignment of plan obligations to time periods,
development of a cost allocation procedure, development of a contribution allocation procedure,
determination of types and levels of benefits, projection of pension obligations, projection of
plan costs or contributions (AAA, 2010).
Much of the financial impact of pensions is based on going from current known data (number
employees, salaries, etc.) through a number of assumptions (how many years work, how many
years collect a pension, mortality rates, what rate able to invest funds at, etc.) to develop the most
likely funding needs over time to provide the retirement benefits as agreed to cover the pension
expenses. Outside of determining the current employees, salaries, etc., almost everything else is
an assumption. How do we make the most appropriate and best assumption to ensure having
dollars available in the future? How much do we need to put aside now that will grow and cover
the pension requirements? This is where the audit firm should employ an actuary to examine the
actuarial-type assumptions made by the company on its employees and current retirees to see if
they are reasonable assumptions given the company’s data. The actuary would be able to help
examine the pension plan assets, the investments, the effective earning rates from the
investments (in comparison to the discount rate being used), the projected pension expenses, and
the resultant pension plan funding situation. The actuary’s review should be able to assist the
auditor in identifying potential issue areas for the auditor’s further examination.
Solution
Answer: The general circumstance for retaining outside experts is where the auditor requires a
special skill or knowledge outside of accounting or auditing, the auditors feel they do not have

2. the level of expertise, or they may want an additional opinion. PCAOB interim Using the Work
of a Specialist provides guidance and recognizes that auditors are not expected to be experts in
all areas, auditors may encounter material matters which are complex or subjective, and an
auditor may use the work of a specialist as evidential matter to evaluate financial statement
assertions (PCAOB AU 336, 2010).
In the case of auditing pensions, the auditors would most likely use an actuary as a specialist as
the auditors would not be expected to have that level of expertise. The actuary would be
knowledgeable of the entire pension development process and be able to more quickly
comprehend the nuances of the actuarial assumptions and mechanics of the calculations. For
example, some of the tasks that the actuary would be involved with the company on for pensions
includes the measurement of pension obligations, assignment of plan obligations to time periods,
development of a cost allocation procedure, development of a contribution allocation procedure,
determination of types and levels of benefits, projection of pension obligations, projection of
plan costs or contributions (AAA, 2010).
Much of the financial impact of pensions is based on going from current known data (number
employees, salaries, etc.) through a number of assumptions (how many years work, how many
years collect a pension, mortality rates, what rate able to invest funds at, etc.) to develop the most
likely funding needs over time to provide the retirement benefits as agreed to cover the pension
expenses. Outside of determining the current employees, salaries, etc., almost everything else is
an assumption. How do we make the most appropriate and best assumption to ensure having
dollars available in the future? How much do we need to put aside now that will grow and cover
the pension requirements? This is where the audit firm should employ an actuary to examine the
actuarial-type assumptions made by the company on its employees and current retirees to see if
they are reasonable assumptions given the company’s data. The actuary would be able to help
examine the pension plan assets, the investments, the effective earning rates from the
investments (in comparison to the discount rate being used), the projected pension expenses, and
the resultant pension plan funding situation. The actuary’s review should be able to assist the
auditor in identifying potential issue areas for the auditor’s further examination.