Final answer:
The incorrect statement regarding the use of another auditor's work for the audits of private companies is that the group engagement partner typically references the work of a component auditor for immaterial subsidiaries in the audit report, which is not standard practice.
Step-by-step explanation:
The statement that is INCORRECT regarding the use of another auditor's work for the audits of private companies is: If the subsidiary audited by the component auditor is an immaterial amount of the group financial statements, the group engagement partner typically decides to reference the work completed by the component auditor in the audit report. This statement is incorrect because, in general, if the subsidiary is immaterial to the group financial statements, the group engagement partner may not mention the component auditor's work in the group auditor's report. Instead, the group engagement partner takes responsibility for the audit as a whole, including the work done by the component auditor. However, if the component's work is material to the group financial statements, it is at the group engagement partner's discretion to decide whether to make reference to the work of the component auditor in the auditor's report.
On the other hand, aggregating the portion audited by all component auditors and expressing it as a single dollar amount or percentage is a correct practice, as it provides clarity on the portion of the financial statements that were covered by other auditors. Also, the group engagement partner must indeed decide whether to refer to the audit of a component auditor in the group's auditor report. Lastly, when reference is made to a component auditor, it is usually because their work is material to the group, and in such cases, the auditor's responsibility paragraph is indeed modified to include a portion of the group financial statements that were audited by the component auditor.