The group auditors decide not to refer to the audit of component auditors who audited a subsidiary of the group financial statements. After making inquiries about the component auditors' professional reputation and independence, the group auditor most likely would
A)document in the engagement letter that the group auditors assume no responsibility for the component auditors' work.
B)obtain written permission from the component auditors to omit the reference in the group auditors' report.
C)contact the component auditors' and review the audit programs and working papers pertaining to the subsidiary.
D)add an explanatory paragraph to the group auditors' report indicating that the subsidiary's financial statements are not material to the consolidated financial statements.

Question

Quizplus · Accepted Answer

When a group auditor decides not to refer to the work of component auditors, they typically take responsibility for the audit work on the component. This involves making inquiries about the component auditors' professional reputation and independence, and reviewing the audit programs and working papers to ensure the work was adequately performed and supports the conclusions drawn. This approach helps the group auditor in assessing the work of the component auditors and determining the nature, timing, and extent of any further audit procedures that may be necessary at the group level.

The Group Auditors Decide Not to Refer to the Audit