Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

How should a CPA firm document their reliance on another firm's audit work?

1. In a detailed report summarizing findings from the documentation.

2. A footnote attached to the financial statements.

3. An attachment of the other firm’s audit report and representation letter.

4. By stating reliance in the introductory section of the report.

The correct answer is: An attachment of the other firm’s audit report and representation letter.

A CPA firm should document their reliance on another firm's audit work by attaching the other firm’s audit report and representation letter. This approach is significant because it not only provides a clear reference to the original audit work performed, but also ensures that critical information from the other firm is available for review. The audit report contains essential details about the scope, findings, and conclusions of the previous audit, while the representation letter provides assurances from management about the accuracy and completeness of the information involved. Using this method enhances transparency and credibility, as it allows for direct access to the audit evidence and conclusions that influenced the current CPA firm's work. Additionally, it aligns with professional standards that emphasize the importance of maintaining documentation that supports reliance on the work of other auditors, thereby fostering confidence in the audit process and the information presented in the financial statements.