Consider the following situations that might arise in the audit of the financial
ID: 2499530 • Letter: C
Question
Consider the following situations that might arise in the audit of the financial statements of a nonpublic company. Indicate the type of opinion(s) that would be issued and describe any other modification to the standard audit report that would result. Unless indicated otherwise, assume that material amounts are involved. When more than one opinion might be issued, explain when each is appropriate.
a. A group auditor decides not to take responsibility for the work of the component auditor who audited a 70% owned subsidiary and issued an unmodified opinion. The total assets and revenues of the subsidiary are 5% and 8%, respectively, of the total assets and revenues of the entity being audited.
Explanation / Answer
In this situation the auditor’s responsibility section and the opinion sections have additional wording added, but there is no emphasis-of-matter paragraph in what remains a report with an unmodified opinion.