Janine and Cristin are discussing the work of component auditors one day while sitting in the campus cafeteria. Janine mentions to Cristin that she is not sure to what extent the component auditor's shares responsibility for the audit report. Which of the following represents Cristin's most appropriate response? O If the parent company auditors elect not to reference the component auditor in the audit report, then the parent company audit firm assumes full responsibility for the contents of the audit report. O The component auditor shares full responsibility for the audit report issued by the parent company's auditor. This is because the financial statements of the parent company include the subsidiary. O The parent company auditors and the component company auditors typically preemptively determine a percentage of responsibility and subsequent liability in the event of future litigation. O The component auditor has no responsibility for the audit report under any circumstances. The component auditor is simply engaged to report on the financial condition of the subsidiary.

Janine and Cristin are discussing the work of component auditors one day while sitting in the campus cafeteria. Janine mentions to Cristin that she is not sure to what extent the component auditor's shares responsibility for the audit report. Which of the following represents Cristin's most appropriate response? O If the parent company auditors elect not to reference the component auditor in the audit report, then the parent company audit firm assumes full responsibility for the contents of the audit report. O The component auditor shares full responsibility for the audit report issued by the parent company's auditor. This is because the financial statements of the parent company include the subsidiary. O The parent company auditors and the component company auditors typically preemptively determine a percentage of responsibility and subsequent liability in the event of future litigation. O The component auditor has no responsibility for the audit report under any circumstances. The component auditor is simply engaged to report on the financial condition of the subsidiary.

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter4: Professional Liability, Auditor Judgment Frameworks, And Professional Responsibilities

Section: Chapter Questions

Problem 64RSCQ

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Stewart Jones is reviewing the results of the subsequent events audit procedures. Stewart is writing a report for his audit partner based on these results and will be attending a meeting tomorrow with the partner and representatives of the company to discuss them. The issue will be whether the financial report should be amended, or additional notes included for these subsequent events. Many of the items are not material and Stewart will recommend that no action be taken with respect to these. However, there are several items that Stewart believes are material and should be discussed at the meeting. These are as follows.(a) The board is planning to issue shares in a private placement on 15 August.(b) The share issue is to fund the purchase of a 60 percent stake in another company. The negotiations are in the final stages and although the contract is not yet signed it will be signed by 15 August.(c) A writ was lodged in the Supreme Court in the week after year-end claiming damages for…
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