Question

Which of the following is false concerning the principal CPA firm's alternatives when issuing a report when another CPA firm performs part of the audit?

1) Issue a joint report signed by both CPA firms.
2) Make no reference to the other CPA firm in the audit report, and issue the standard unqualified opinion.
3) Make reference to the other auditor in the report by using modified wording (a shared opinion or report).
4) A qualified opinion or disclaimer, depending on materiality, is required if the principal auditor is not willing to assume any responsibility for the work of the other auditor.

Answer 1

The false statement regarding a principal CPA firm's reporting options when another CPA firm performs part of the audit is that 4) a qualified opinion or disclaimer is required if the principal auditor does not want to assume responsibility for the other auditor's work; in reality, they can issue a report without reference to the other firm's work.

Step-by-step explanation:

The question relates to the auditor's reports when one CPA firm (the principal auditor) uses the work of another CPA firm in an audit. The false statement is number 4) 'A qualified opinion or disclaimer, depending on materiality, is required if the principal auditor is not willing to assume any responsibility for the work of the other auditor.' This is not true as the principal auditor has the option to issue a report without referencing the work of the other auditor; the involvement of another auditor doesn't inherently require a qualified opinion or a disclaimer.

The principal auditor can choose among the following options:

It is crucial for the principal auditor's report to properly communicate the degree of responsibility taken regarding the work of the other auditor, which reflects on the credibility and reliability of the financial statements audited.