Question

Refer to Exhibit 15.3 and the Why It Matters feature Differing Guidance on Referring to Other Auditors. How do the requirements for referring to other auditors differ between U.S. auditing standards and the ISAs?

Exhibit 15.3 Example of an Excerpt from an Unqualified Audit Report with Explanatory Language Indicating the Division of Responsibility and Making a Reference to the Other Auditors: PCAOB Audit NOTE: The format of the audit report depends on the auditing standards the auditor is following. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of X Company (the "Company") and subsidiaries as of December 31, 20...., and the related consolidated statements of (titles of the financial statements, e.g., income, comprehensive income, stockholders' equity, and cash flows) for the year then ended, and the related notes (and schedules) (collectively referred to as the "consolidated financial statements”). In our opinion, based on our audit and the report of the other auditors, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of (at] December 31, 20...., and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. We did not audit the financial statements of B Company, a wholly-owned

Answer 1

Principal Auditor – Auditor with the responsibility for reporting on the financial information of an entity when that financial information includes the financial information of one or more component . Component mean a division , Branch , subsidiary , Joint venture other entity whose financial information is included in the financial information audited by principal auditor

Auditor other than the principal auditor , with the responsibility for reporting on the financial information of a component which is included in the financial information audited by the principal auditor

As er ISA 600 , Principal Auditor should do following procedure before relying on other auditor work , like :

1. Co Ordinate with Auditor at planning Stage
2. Inform Other Auditor of area requiring special consideration
3. Time limit to complete Audit
4. Significant accounting , Auditing and other requirement as per Law
5. Consider significant finding by Other Auditor
6. Decide whether supplemental test of the records or financial statement is necessary

Other auditor should co ordinate with Principal Auditor .

Principal auditor is not responsible for other auditor work except that in case of any suspicious arise about the reliability of the other auditor work     

The principal auditor should clearly state the division of responsibility by indicating the extent , to which the information audited by the other auditor has been relied upon in forming an opinion on the entity financial Statement

As per USGAAP - AU C 600 , When the Auditor choose to assume responsibility for the work of the component auditor , the new standard increase auditor responsibilities ( and their involvement with the component Auditor) with respect to :

When a component is deemed significant , the required audit procedures exceed those of the standard . As per new standard , group engagement team to be involved in the risk assessment of the component .

Auditor needs to take care of following additional procedure :

1. The group engagement teams process to assess risk
2. The determination of materiality to be used to audit the components and group financial statements
3. The selection of components and account balance for Audit testing

Communication between the group engagement team and component auditor