Question

When reference is made to a component auditor, which of the following paragraphs is modified to include the portion of the group financial statements that were audited by the component auditor?

A. Auditor's responsibility paragraph
B. Scope paragraph
C. Going concern paragraph
D. Emphasis-of-the-matter paragraph

Answer 1

The Scope paragraph in the principal auditor's report is modified to indicate the portion of the financial statements that were audited by a component auditor. Hence, option (B) is correct.

Step-by-step explanation:

When a component auditor is involved in the audit of group financial statements, the paragraph modified to include the portion of the group financial statements audited by the component auditor is the B. Scope paragraph. The scope paragraph of the principal auditor's report is specifically tailored to identify the magnitude of the financial information audited by the component auditor.

It clarifies the division of responsibilities between the principal auditor and the component auditor, ensuring transparency about who audited which components of the financial statements. This modification is essential to provide an understanding of the division of work between the principal auditor and the component auditor(s).