Consider the following situations that might arise in the audit of the financial
ID: 2499532 • 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 CPA has decided to emphasize in the audit report that the company he is auditing is a component of XYZ Company, its parent.
Explanation / Answer
The parent company of a group will normally publish its financial statements as an individual company and the group financial statements in the same document, so, the audit opinion will normally be expressed on ‘the financial statements of the company and of the group as at...’ Although presented as one opinion, it logically contains two separate opinions; one on the entity financial statements of the parent itself and another on the financial statements of the group. ISA prohibits the group auditor from making any reference to the work of any other experts or auditors, as doing so would diminish the credibility of the audit opinion and allow the group auditor to 'pass the buck' for resposibility for part of the audit.