Question

If the work of the component auditor is a material portion of the group financial statements, the group engagement partner is likely to reference the work of the component auditor and not accept responsibility for that work.

1) True
2) False

Answer 1

The group engagement partner remains responsible for the work of the component auditor and only under unique circumstances would they reference the auditor's work in the report, maintaining responsibility for the audit in its entirety.

Step-by-step explanation:

The statement is false. When the work of a component auditor is used for a material portion of the group financial statements, the group engagement partner does retain responsibility for the work of the component auditor according to auditing standards. The group engagement partner typically evaluates the work of the component auditor to determine whether it is sufficient and appropriate for the purposes of the group audit.

It is important for the group engagement partner to understand the component auditor's work, the competence and independence of the component auditor, and the business environment in which the component operates. The group engagement partner would only refer to the work of a component auditor in certain circumstances, such as when different auditing firms are involved and there is a regulatory requirement to make such a reference.