An auditor is reviewing the work of a component auditor. The component auditor's findings indicate a material misstatement in the component's financial statements. The component is not material to the group financial statements. The auditor should:

Answer options:

Issue a qualified opinion on the group financial statements.

Require the component auditor to issue an adverse opinion.

Evaluate whether the misstatement is material to the group financial statements.

Withdraw from the group audit.

How to approach this question

Group Audit Logic: Component error -> Is it material to the GROUP? If no, no group modification needed.

Full Answer

C.Evaluate whether the misstatement is material to the group financial statements.✓ Correct

Evaluate whether the misstatement is material to the group financial statements.

The group engagement partner must evaluate the effect of the component's misstatement on the group financial statements. If the component is immaterial and the error is immaterial to the group, no modification to the group opinion is required (though the error is noted in the summary of uncorrected misstatements).

Common mistakes

Thinking an error in a component automatically ruins the group opinion.

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