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

What must a group engagement partner do if they choose to assume responsibility for a component auditor's work?

1. Include a reference to the component auditor in the report.

2. Issue a modified opinion on the consolidated financial statements.

3. Evaluate the component auditor's independence.

4. State the assumption in the auditor's responsibility paragraph.

The correct answer is: State the assumption in the auditor's responsibility paragraph.

When a group engagement partner decides to assume responsibility for a component auditor's work, it is essential to clearly state this assumption in the auditor's responsibility paragraph of the audit report. This communication serves to inform users of the financial statements that the group engagement partner has taken on the responsibility for the component’s audit results, rather than merely relying on the component auditor’s work without oversight. This practice is important because it reinforces the accountability of the group engagement partner regarding the accuracy and integrity of the financial statements. By explicitly stating this in the auditor's responsibility paragraph, it enhances the transparency of the audit process for stakeholders, allowing them to better understand the extent of the group's evaluation of the financial statements. In contrast, while references to the component auditor might be relevant in different contexts, issuing a modified opinion or evaluating the component auditor’s independence are not necessary steps when the group engagement partner assumes responsibility for the work. The focus of this specific scenario is on clear communication of accountability in the auditor's report.