In the auditor's report, the principal auditor decides not to make reference to another CPA who audited a client's subsidiary. The principal auditor could justify this decision if, among other requirements, the principal auditor:

Question

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Choice "D" is correct. If, among other requirements, the principal auditor is satisfied as to the independence and the professional reputation of the other auditor, the principal auditor may express an opinion on the financial statements taken as a whole without making reference to the audit of the other auditor. Choice "A" is incorrect. Whether or not an unqualified opinion is issued is not the determining factor as to whether the principal auditor must make reference to another CPA. Choice "B" is incorrect. Whether or not an unqualified opinion is issued on the subsidiary's financial statements is not the determining factor as to whether the principal auditor must make reference to another CPA. Choice "C" is incorrect. If the principal auditor is unable to review the audit programs and audit documentation of the other CPA, he or she is likely to divide responsibility by making reference to the other CPA in the auditor's report.

In the Auditor's Report, the Principal Auditor Decides Not to Make