An auditor who accepts an audit engagement and does not possess expertise with respect to the business entity's industry,should
A) Engage financial experts familiar with the nature of the business entity.
B) Obtain a knowledge of matters that relate to the nature of the entity's business.
C) Refer a substantial portion of the audit to another CPA, who will act as the principal auditor.
D) First inform management that an unqualified opinion cannot be issued.

Question

Quizplus · Accepted Answer

If the auditor does not possess expertise with respect to the business entity's industry, the auditor should obtain a knowledge of matters that relate to the nature of the entity's business. This will help the auditor gain understanding of the industry-specific risks that may affect the financial statements. Engaging financial experts or referring the audit to another CPA may not be necessary if the auditor can gain sufficient knowledge of the business through other means. Informing management that an unqualified opinion cannot be issued would be premature and not helpful without exploring other options first.

An Auditor Who Accepts an Audit Engagement and Does Not