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

What justification could a group engagement partner have for not referring to another auditor in the report?

1. The group partner is unsatisfied with the independence and reputation of the other auditor.

2. The financial statements audited by the other auditor are immaterial.

3. The group partner is satisfied with the independence of the component auditor.

4. The group partner issues a modified opinion.

The correct answer is: The group partner is satisfied with the independence of the component auditor.

A group engagement partner may choose not to refer to another auditor in their report when they are satisfied with the independence of the component auditor, as this reflects a confidence in the integrity and objectivity of that auditor’s work. When the group engagement partner has thoroughly evaluated the capabilities and ethical standing of the component auditor and determines that there is no issue with independence, they can confidently incorporate the findings of the component auditor into the overall group audit without the need for a specific reference. In practice, referring to another auditor in the report can imply a degree of reliance on their work and could be necessary when the component auditor’s work is material to the group audit. If the component auditor’s work is deemed satisfactory and based on their independence, it alleviates the need for specificity in the report, allowing the group partner to convey a unified opinion on the group financial statements. The other choices revolve around aspects that would generally necessitate a mention of the other auditor or would imply reservations about their work, which contrasts with the underlying assurance provided by the assessment of independence. Therefore, the satisfaction with the independence of the component auditor is a robust rationale for not needing to make a specific reference to them in the report.