Need help on Becker Question – making reference to component auditor

  • Creator
    Topic
  • #836347
    lk
    Participant

    Becker MCQ again. Very confusing.

    My thoughts: Becker is selecting c as the correct answer. This doesn’t sound right to me. From my understanding, the group auditor must at least review the component auditor’s work or at least do something in order not to make reference to the component auditor and assume the responsibility on component auditor’s work.
    Choice c here is saying the group auditor is assuming the responsibility solely because they trust the component auditor’s work without even looking at it at all? Can they really do that? Taking the responsibility without even reviewing the work?

    Also in general, if the group engagement auditor doesn’t want to make reference to the component auditor’s work, what do they have to do first? Becker book only mentions what they need to do if they want to make reference.

    Thanks for the help.

    Question:
    In the auditor’s report under U.S. GAAS, the group engagement partner decides not to make reference to another CPA who audited a client’s subsidiary. The group engagement partner could justify this decision if, among other requirements, the group engagement partner:

    a.Learns that the component auditor issued an unmodified opinion on the subsidiary’s financial statements.
    b.Issues an unmodified opinion on the consolidated financial statements.
    c.Is satisfied as to the independence and professional reputation of the component auditor.
    d.Is unable to review the audit programs and audit documentation of the component auditor.

    Becker Explanation
    Choice “c” is correct. Under U.S. GAAS, if, among other requirements, the group engagement partner is satisfied as to the independence and the professional reputation of the component auditor, the group engagement partner may express an opinion on the financial statements taken as a whole without making reference to the audit of the component auditor.
    Choice “b” is incorrect. Whether or not an unmodified opinion is issued is not the determining factor as to whether the group engagement partner must make reference to the component auditor.
    Choice “a” is incorrect. Whether or not an unmodified opinion is issued on the subsidiary’s financial statements is not the determining factor as to whether the group engagement partner must make reference to a component auditor.
    Choice “d” is incorrect. If the group engagement partner is unable to review the audit programs and audit documentation of the component auditor, he or she is likely to divide responsibility by making reference to the component auditor in the auditor’s report.

Viewing 4 replies - 1 through 4 (of 4 total)
  • Author
    Replies
  • #836602
    Anonymous
    Inactive

    The question doesn't say “solely based on this” – it says “The group engagement partner could justify this decision if, among other requirements, the group engagement partner”

    #837175
    lk
    Participant
    #837193
    mckan514w
    Participant

    IK I think you are reading too much into the question as allaboard said the question here is simply asking you for one of the requirements that would allow an auditor to not mention the other auditor- which of those answers given only C would fit.

    Remember if auditor is satisfied with / can rely component auditors work don't mention

    if auditor is not satisfied / can not rely on component auditor work then it should be mentioned.

    (Typically it goes without saying that the “lead auditor” reviews the work or has the team do it)

    and they ask me why I drink...

    FAR- 61-next time I'll ask for lube instead of a calculator
    REG-75- Never been so happy to see such a low grade
    BEC- 8/11
    AUD- 9/2

    #837271
    lk
    Participant

    Make sense now. I was originally thinking “oh if we don't even trust someone's work why making reference to the bad work!” But seems like the right logic is “shit! i don't trust his work! so i need to mention that part of the work is done by him! so to stay away from that responsibility.”

    thanks a lot for the explanation.

Viewing 4 replies - 1 through 4 (of 4 total)
  • The topic ‘Need help on Becker Question – making reference to component auditor’ is closed to new replies.