#20

Janine and Cristin are discussing the work of component auditors one day while sitting in the campus cafeteria. Janine mentions to Cristin that she is not sure to what extent the component auditor's shares responsibility for the audit report. Which of the following represents Cristin's most appropriate response? If the parent company auditors elect not to reference the component auditor in the audit report, then the parent company audit firm assumes full responsibility for the contents of the audit report. The component auditor shares full responsibility for the audit report issued by the parent company's auditor. This is because the financial statements of the parent company include the subsidiary. The parent company auditors and the component company auditors typically preemptively determine a percentage of responsibility and subsequent liability in the event of future litigation. The component auditor has no responsibility for the audit report under any circumstances. The component auditor is simply engaged to report on the financial condition of the subsidiary