William Gregory, CPA, is the principal auditor for an international corporation. Another CPA has examined and reported on the financial statements of a significant subsidiary of the corporation. Gregory is satisfied with the independence and professional reputation of the other auditor, as well as the quality of the other auditor's examination. With respect to his report on the consolidated financial statements, taken as a whole, Gregory
A) must not refer to the examination of the other auditor.
B) must refer to the examination of the other auditor.
C) may refer to the examination of the other auditor.
D) must refer to the examination of the other auditors along with the percentage of consolidated assets and revenue that they audited.

Question

Quizplus · Accepted Answer

According to Generally Accepted Auditing Standards (GAAS), Gregory may refer to the examination of the other auditor in his report on the consolidated financial statements, but he is not required to do so. Therefore, choice C is the best answer. Gregory may choose to refer to the other auditor's examination in his report if he believes it would provide useful information to the reader. However, if he does refer to the other auditor's examination, he must ensure that it is accurate and complete.

William Gregory, CPA, Is the Principal Auditor for an International