CPA REVIEW SCHOOL OF THE PHILIPPINES AT-9006

Manila

AUDITING THEORY CPA Review

MATERIALITY IN PLANNING AND PERFORMING AN AUDIT

EVALUATION OF MISSTATEMENTS IDENTIFIED DURING THE AUDIT
ANALYTICAL PROCEDURES
RELATED PARTIES
USING THE WORK OF INTERNAL AUDITORS
USING THE WORK OF AN AUDITOR’S EXPERT

PSA 320
MATERIALITY IN PLANNING AND PERFORMING AN AUDIT

1. The auditor’s determination of materiality is a matter of professional judgment, and is

affected by the auditor’s perception of the financial information needs of users of the
financial statements.

2. The concept of materiality is applied by the auditor both

a) In planning and performing the audit; and
b) In evaluating the effect of identified misstatements on the audit and of uncorrected
misstatements, if any, on the financial statements and in forming the opinion in the
auditor’s report.

3. In planning the audit, the auditor makes judgments about the size of misstatements that
will be considered material. These judgments provide a basis for:
a) Determining the nature, timing, and extent of risk assessment procedures;
b) Identifying and assessing the risks of material misstatement; and
c) Determining the nature, timing, and extent of further audit procedures.

4. THREE DIFFERENT LEVELS OF MATERIALITY (AASC Bulletin Series 001 of 2010)

1. Materiality for the financial statements as a whole –

➢ Determined at the overall financial statement level.

➢ Helps the auditor determine whether the proposed audit adjustments are significant
or not.
➢ Required steps in calculating overall materiality:
1) Identify an appropriate benchmark which could either be an element or
component of the financial statements.
2) Choose an appropriate percentage to be applied to that benchmark.

2. Performance materiality –

➢ Calculated as a certain percentage of overall materiality in order to capture any

uncorrected misstatements, the total amount of which may exceed overall
materiality.
➢ Used in scoping of financial statement line items to be tested by the auditor and
ensures that significant accounts in the financial statements are covered by audit
testing.

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➢ In determining performance materiality, an understanding of the following factors

may affect the auditor’s judgment such as:
• nature of the entity’s business and transactions
• risk assessment procedures
• nature and extent of misstatements identified in previous audits

3. Materiality applied to specific classes of transactions, account balances or

disclosures –

➢ The amount set by the auditor for particular classes of transactions, account
balances or disclosures for which misstatements, well though lower than overall
materiality could reasonably be expected to influence the economic decisions of
users of the financial statements.
➢ In determining the specific materiality, the auditor normally considers the following
factors:
• laws and regulations
• financial reporting framework
• key industry disclosures of the entity
• particular aspects of the entity’s business
• understanding of the view of those charged with governance and management

5. If the auditor becomes aware of information during the audit that would have caused the
determination of a different amount of the benchmark, the auditor should revise the overall
materiality and assess the need to revise performance materiality and specific materiality,
and whether the nature, timing, and extent of further audit procedures remain appropriate.

6. The auditor is required to include in the audit documentation the amounts and the factors
considered in the determination of the materiality levels including the basis for any revisions
to those materiality levels. Audit documentation should demonstrate the judgment and
rationale used by the auditor in determining the materiality levels.

PSA 450
EVALUATION OF MISSTATEMENTS IDENTIFIED DURING THE AUDIT

1. The objective of the auditor is to evaluate:

a) The effect of identified misstatements on the audit; and
b) The effect of uncorrected misstatements, if any, on the financial statements.

2. The auditor SHALL:

• Accumulate misstatements identified during the audit, other than those that are clearly
trivial.
• Determine whether the overall audit strategy and audit plan need to be revised if:
a) the nature of identified misstatements and the circumstances of their occurrence
indicate that other misstatements may exist that, when aggregated with
misstatements accumulated during the audit, could be material; or
b) the aggregate of misstatements accumulated during the audit approaches materiality
determined in accordance with PSA 320 (Revised and Redrafted).
• Communicate on a timely basis all misstatements accumulated during the audit with the
appropriate level of management, unless prohibited by law or regulation. The auditor
shall request management to correct those misstatements.
• Determine whether uncorrected misstatements are material, individually or in aggregate.

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• Communicate with those charged with governance uncorrected misstatements and the
effect that they, individually or in aggregate, may have on the opinion in the auditor’s
report, unless prohibited by law or regulation. The auditor shall also communicate with
those charged with governance the effect of uncorrected misstatements related to prior
periods on the relevant classes of transactions, account balances or disclosures, and the
financial statements as a whole.
• Request a written representation from management and, where appropriate, those
charged with governance whether they believe the effects of uncorrected misstatements
are immaterial, individually and in aggregate, to the financial statements as a whole.

3. The audit documentation shall include:

a) The amount below which misstatements would be regarded as clearly trivial;
b) All misstatements accumulated during the audit and whether they have been corrected;
and
c) The auditor’s conclusion as to whether uncorrected misstatements are material,
individually or in aggregate, and the basis for that conclusion.

PSA 520
ANALYTICAL PROCEDURES

1. “Analytical procedures”
• means evaluations of financial information through analysis of plausible relationships
among both financial and nonfinancial data.
• also encompass such investigation as is necessary of identified fluctuations or
relationships that are inconsistent with other relevant information or that differ from
expected values by a significant amount.

2. The objectives of the auditor are:

• to obtain relevant and reliable audit evidence when using substantive analytical
procedures; and
• to design and perform analytical procedures near the end of the audit that assist the
auditor when forming an overall opinion conclusion as to whether the financial
statements are consistent with the auditor’s understanding of the entity.

3. Substantive analytical procedures

When designing and performing substantive analytical procedures, either alone or in

combination with tests of details, as substantive procedures in accordance with PSA 330
(Redrafted), the auditor shall:
a) Determine the suitability of particular substantive analytical procedures for given
assertions, taking account of the assessed risks of material misstatement and tests of
details, if any, for these assertions;
b) Evaluate the reliability of data from which the auditor’s expectations of recorded
amounts or ratios is developed, taking account of source, comparability, and nature and
relevance of information available, and controls over preparation;
c) Develop an expectation of recorded amounts or ratios and evaluate whether the
expectation is sufficiently precise to identify a misstatement that, individually or when
aggregated with other misstatements, may cause the financial statements to be
materially misstated; and
d) Determine the amount of any difference of recorded amounts from expected values that
is acceptable without further investigation.

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4. Analytical procedures that assist when forming an overall conclusion

The auditor shall design and perform analytical procedures near the end of the audit that
assist the auditor when forming an overall conclusion as to whether the financial statements
are consistent with the auditor’s understanding of the entity.

5. If analytical procedures performed in accordance with PSA 520 identify fluctuations or

relationships that are inconsistent with other relevant information or that differ from
expected values by a significant amount, the auditor shall investigate such differences by:
a) Inquiring of management and obtaining appropriate audit evidence relevant to
management’s responses; and
b) Performing other audit procedures as necessary in the circumstances.

PSA 550
RELATED PARTIES

1. The auditor shall inquire of management regarding:

a) The identity of the entity’s related parties, including changes from the prior period;
b) The nature of the relationships between the entity and these related parties; and
c) Whether the entity entered into any transactions with these related parties during the
period and, if so, the type and purpose of the transactions.

2. The auditor shall inquire of management and others within the entity, and perform other
risk assessment procedures considered appropriate, to obtain an understanding of the
controls, if any, that management has established to:
a) Identify, account for, and disclose related party relationships and transactions in
accordance with the applicable financial reporting framework;
b) Authorize and approve significant transactions and arrangements with related parties;
and
c) Authorize and approve significant transactions and arrangements outside the normal
course of business.

3. During the audit, the auditor shall remain alert, when inspecting records or documents, for
arrangements or other information that may indicate the existence of related party
relationships or transactions that management has not previously identified or disclosed to
the auditor.

4. The auditor shall share relevant information obtained about the entity’s related parties with
the other members of the engagement team.

5. The auditor shall treat identified significant related party transactions outside the entity’s
normal course of business as giving rise to significant risks.

6. In forming an opinion on the financial statements, the auditor shall evaluate

a) Whether the identified related party relationships and transactions have been
appropriately accounted for and disclosed in accordance with the applicable financial
reporting framework; and

b) Whether the effects of the related party relationships and transactions:

i. Prevent the financial statements from achieving fair presentation (for fair
presentation frameworks); or
ii. Cause the financial statements to be misleading (for compliance frameworks).

7. Unless all of those charged with governance are involved in managing the entity, the auditor
shall communicate with those charged with governance significant matters arising during
the audit in connection with the entity’s related parties.

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8. The auditor shall include in the audit documentation the names of the identified related
parties and the nature of the related party relationships.

PSA 610 (Revised)

USING THE WORK OF INTERNAL AUDITORS

1. The external auditor shall determine whether the work of the internal audit function can be
used for purposes of the audit by evaluating the following:
a) The extent to which the internal audit function’s organizational status and relevant
policies and procedures support the objectivity of the internal auditors;
b) The level of competence of the internal audit function; and
c) Whether the internal audit function applies a systematic and disciplined approach,
including quality control.

2. If the external auditor plans to use the work of the internal audit function, the external
auditor shall discuss the planned used of its work with the function as a basis for
coordinating their respective activities.

3. The external auditor shall read the reports of the internal audit function relating to the work
of the internal audit function that the external auditor plans to use to determine its adequacy
for purposes of the audit.

4. If using internal auditors to provide direct assistance for purposes of the audit is not
prohibited by law or regulation, and the external auditor plans to use internal auditors to
provide direct assistance on the audit, the external auditor shall evaluate the existence and
significance of threats to objectivity and the level of competence of the internal
auditors who will be providing such assistance.

PSA 620
USING THE WORK OF AN AUDITOR’S EXPERT

1. Auditor’s expert – An individual or organization possessing expertise in a field other than

accounting or auditing, whose work in that field is used by the auditor to assist the auditor
in obtaining sufficient appropriate audit evidence.

2. An auditor’s expert may assist the auditor in:

• Obtaining an understanding of the entity and its environment, including its internal
control.
• Identifying and assessing the risks of material misstatement.
• Determining and implementing overall responses to assessed risks at the financial
statement level.
• Designing and performing further audit procedures.
• Evaluating the sufficiency and appropriateness of audit evidence.

3. When planning to use the work of an auditor’s expert, the auditor shall evaluate the
competence, capability and objectivity of the auditor’s expert.

4. The auditor shall obtain sufficient understanding of the field of the expertise of the auditor’s
expert to enable the auditor to:
• Determine the nature, scope and objectives of that expert’s work for the auditor’s
purposes.
• Evaluate the adequacy of that work for the auditor’s purposes.

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5. The auditor shall agree, in writing when appropriate, on the following matters with the
auditor’s expert:
• The nature, scope and objectives of that expert’s work.
• The respective roles and responsibilities of the auditor and that expert.
• The nature, timing and extent of communication between the auditor and that expert,
including the form of any report to be provided by that expert.
• The need for the auditor’s expert to observe confidentiality requirements.

6. The auditor shall evaluate the adequacy of the auditor’s expert’s work for the auditor’s
purposes, including:
• The relevance and reasonableness of that expert’s findings or conclusions, and their
consistency with other audit evidence.
• If that expert’s work involve used of significant assumptions and methods, the relevance
and reasonableness of those assumptions and methods in the circumstances.
• If that expert’s work involves the use of source data that is significant to that expert’s
work, the relevance, completeness, and accuracy of that source data.

7. If the auditor determines that the work of the auditor’s expert is not adequate for the
auditor’s purposes, the auditor shall:
• Agree with that expert on the nature and extent of further work to be performed that
that expert.
• Perform additional audit procedures appropriate to the circumstances.

8. The auditor shall not refer to the work of an auditor’s expert in an auditor’s report containing
an unmodified opinion unless required by law or regulation to do so.

9. If the auditor makes reference to the work of an auditor’s expert in the auditor’s report
because such reference is relevant to an understanding of a modification to the auditor’s
opinion, the auditor shall indicate in the auditor’s report that such reference does not reduce
the auditor’s responsibility for that opinion.

MULTIPLE CHOICE QUESTIONS

1. Which of the following would an auditor most likely use in determining the auditor’s
preliminary judgment about materiality for the financial statements as a whole?
A. The anticipated sample size of the planned substantive tests.
B. The entity’s year-to-date financial results and position.
C. The results of the internal control questionnaire.
D. The contents of the management representation letter.

2. The auditor is required to determine three different levels of materiality: (1) materiality for
the financial statements as a whole, (2) performance materiality, and (3)
A. Overall materiality C. General materiality
B. Planning materiality D. Specific materiality

3. What materiality level would be considered by the auditor to determine whether the proposed
adjustments are significant or not?
A. Overall materiality C. Specific materiality
B. Scoping materiality D. Performance materiality

4. Which of the following factors are normally considered by the auditor in determining the
appropriate benchmark for the purpose of calculating overall materiality?
I. Components of the entity’s financial statements
II. Laws and regulations
III. Nature of the entity
A. I and II only C. II and III only
B. I and III only D. I, II, and III

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5. In considering materiality for planning purposes, the auditor believes that misstatements
aggregating P60,000 would have material effect on an entity’s income statement, but that
misstatements would have to aggregate P40,000 to materially affect the statement of financial
position. Ordinarily, it would be appropriate to design auditing procedures that would be
expected to detect misstatements that aggregate:
A. P40,000 C. P60,000
B. P50,000 D. P100,000

6. Which of the following statements is not correct about materiality?

A. The concept of materiality recognizes that some matters are important for fair
presentation of financial statements in conformity with GAAP, while other matters are not
important.
B. An auditor considers materiality for planning purposes in terms of the largest aggregate
level of misstatements that could be material to any one of the financial statements.
C. Materiality judgments are made in light of surrounding circumstanced and necessarily
involve both quantitative and qualitative judgments.
D. An auditor’s consideration of materiality is influenced by the auditor’s perception of the
needs of a reasonable person who will rely on the financial statements.

7. Which of the following statements concerning materiality thresholds in incorrect?

A. Materiality thresholds may change between the planning and review stages of the audit.
These changes may be due to quantitative and/or qualitative factors.
B. The smallest aggregate level of errors or fraud that could be considered material to any
of the financial statements is referred to as a materiality threshold.
C. In general, the more misstatements the auditor expects, the higher should be the
aggregate materiality threshold.
D. Aggregate materiality thresholds are a function of the auditor’s preliminary judgment
concerning audit risk.

8. The concepts of audit risk and materiality are interrelated and must be considered together
by the auditor. Which of the following is true?
A. Audit risk is the risk that the auditor may unknowingly express a modified opinion when,
in fact, the financial statements are fairly stated.
B. The phrase in the auditor’s report “present fairly, in all material respects, in accordance
with Philippine Financial Reporting Standards” indicates the auditor’s belief that the
financial statements as a whole are not materially misstated.
C. If misstatements are not important individually but are important in the aggregate, the
concept of materiality does not apply.
D. Material fraud but not material errors cause financial statements to be materially
misstated.

9. In evaluating the fair presentation of the financial statements, the auditor should assess
whether the aggregate of uncorrected misstatements that have been identified during the
audit is material. The aggregate of uncorrected misstatements comprises
I. Specific misstatements identified by the auditor including the net effect of uncorrected
misstatements identified during the audit of previous period.
II. The auditor’s best estimate of other misstatements which cannot be specifically identified.
A. I only. C. Both I and II.
B. II only. D. Neither I nor II.

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10. A client decides not to correct misstatements communicated by the auditor that collectively
are not material and wants the auditor to issue the report based on the uncorrected numbers.
Which of the following statements is correct regarding the financial statement presentation?
A. The financial statements are free from material misstatement, and no disclosure is
required in the notes to the financial statements.
B. The financial statements are not in accordance with the applicable financial reporting
framework.
C. The financial statements contain uncorrected misstatements that should result in a
qualified opinion.
D. The financial statements are free of material misstatement, but the disclosure of the
proposed adjustments is required in the notes to the financial statements.

11. A basic premise underlying the application of analytical procedures is that

A. The study of financial ratios is an acceptable alternative to the investigation of unusual
fluctuations
B. Statistical tests of financial information may lead to the discovery of material errors in the
financial statements
C. Plausible relationships among data may reasonably be expected to exist and continue in
the absence of known conditions to the contrary
D. These procedures cannot replace tests of balances and transactions

12. For audits of financial statements made in accordance with PSAs, the use of analytical
procedures is required to some extent
In the As a In the
Planning Stage Substantive Test Review Stage
A. Yes Yes Yes
B. Yes No Yes
C. No Yes Yes
D. Yes Yes No

13. Which of the following would not be considered an analytical procedure?

A. Estimating payroll expense by multiplying the number of employees by the average hourly
wage rate and the total hours worked.
B. Projecting an error rate by comparing the results of a statistical sample with the actual
population characteristics.
C. Computing accounts receivable turnover by dividing credit sales by the average net
receivables.
D. Developing the expected sales based on the sales trend of the prior five years.

14. Analytical procedures used in planning an audit should focus on

A. Reducing the scope of tests of controls and substantive tests.
B. Providing assurance that potential misstatements will be identified.
C. Enhancing the auditor’s understanding of the client’s business.
D. Assuming the adequacy of the available evidential matter.

15. The objective of performing analytical procedures as risk assessment procedures in an audit
is to identify
A. Unusual transactions and events.
B. Noncompliance with laws and regulations that went undetected because of internal control
weaknesses.
C. Relate party transactions.
D. Recorded transactions that were properly authorized.

16. Which of the following statements concerning analytical procedures is true?

A. Analytical procedures may be omitted entirely for some financial statement audits.
B. Analytical procedures used in planning the audit should not use nonfinancial information.
C. Analytical procedures usually are effective and efficient for tests of controls.
D. Analytical procedures alone may provide the appropriate level of assurance for some
assertions.

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17. Analytical procedures may be classified as being primarily

A. Tests of controls. C. Tests of ratios.
B. Substantive tests. D. Tests of details of balances.

18. Which of the following items tend to be the most predictable for purposes of analytical
procedures applied as substantive tests?
A. Relationships involving balance sheet accounts
B. Transactions subject to management discretions
C. Relationships involving income statement accounts
D. Data subject to audit testing in the prior period

19. The primary objective of analytical procedures used in the overall review stage of an audit is
to
A. Obtain evidence from details testing to corroborate particular assertions.
B. Identify areas that represent specific risks relevant to the audit.
C. Assist the auditor in assessing the validity of the conclusions reached.
D. Satisfy doubts when questions arise about a client’s ability to continue in existence.

20. Analytical procedures in the overall review should be:

A. Applied to every item on the financial statements
B. Performed by the partner or manager on the engagement
C. Based on financial statement data before all audit adjustment and reclassifications have
been recognized
D. Performed only when material misstatement is expected

21. S1: Related party transactions refers to a person or entity that has the ability to control the
other party or exercise significant influence over the other party in making financial and
operating decisions
S2: Related party disclosure is a transfer of resources or obligations between related parties,
regardless of whether a price is charged.
A. True, true C. True, false
B. False, false D. False, true

22. The auditor should review information provided by those charged with governance and
management identifying
I. The names of all known related parties.
II. Related party transactions.
A. I only C. Both I and II
B. II only D. Neither I nor II

23. When auditing related party transactions, an auditor places primary emphasis on
A. Confirming the existence of the related parties.
B. Verifying the valuation of the related party transactions.
C. Evaluating the disclosure of the related party transactions.
D. Ascertaining the rights and obligations of the related parties.

24. The auditor needs to be aware of the existence of related parties and transactions between
such parties. Which of the following is the least likely reason?
A. GAAP in the Philippines require disclosure in the financial statements of certain related
party relationships and transactions.
B. Related parties and transactions between such parties are considered unusual features of
business.
C. The source of audit evidence affects the auditor's assessment of its reliability.
D. A related party transaction may be motivated by other than ordinary business
considerations.

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25. Which of the following would not necessarily a related-party transaction?

A. Sales to another corporation with a similar name.
B. Purchases from another corporation that is controlled by the corporation’s chief
stockholder.
C. Loan from the corporation to a major stockholder.
D. Sale of land to the corporation by the spouse of a director.

26. Which of the following most likely would indicate the existence of related parties?
A. Writing down obsolete inventory just before year-end.
B. Failing to correct previously identified internal control deficiencies.
C. Depending on a single product for the success of the entity.
D. Borrowing money at an interest rate significantly below the market rate.

27. Which of the following auditing procedures is most likely to assist an auditor in identifying
related party transactions?
A. Retesting ineffective controls previously reported to the audit committee.
B. Sending second request for unanswered positive confirmations of accounts receivable.
C. Reviewing information provided by management identifying related parties and being alert
for other material related party transactions.
D. Inspecting communications with law firms for evidence of unreported contingent liabilities.

28. Which of the following auditing procedures most likely would assist an auditor in identifying
related party transactions?
A. Inspecting correspondence with lawyers for evidence of unreported contingent liabilities.
B. Vouching accounting records for recurring transactions recorded just after the balance
sheet date.
C. Reviewing confirmations of loans receivable and payable for indications of guarantees.
D. Performing analytical procedures for indications of possible financial difficulties.

29. After determining that a related party transaction has, in fact, occurred an auditor should
A. Substantiate that related party transactions were consummated on terms equivalent to
those that prevail in arm’s-length transactions.
B. Perform analytical procedures to verify whether similar transactions have occurred, but
were not recorded.
C. Obtain an understanding of the purpose of the transaction.
D. Determine whether a particular transaction would have occurred if the parties had not
been related.

30. When auditing related party transactions, an auditor places primary emphasis on
A. Confirming the existence of the related parties.
B. Verifying the valuation of the related party transactions.
C. Assessing the risks of material misstatement of related party transactions.
D. Ascertaining the rights and obligations of the related parties.

31. Which of the following are included in the activities of the internal audit function?
I. Monitoring of internal control.
II. Examination of financial and operating information.
III. Review of operating activities.
A. I and II only C. II and III only
B. I and III only D. I, II, and III

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32. The external auditor should obtain a sufficient understanding of the internal audit function
because
A. The understanding of the internal audit function is an important substantive test to be
performed by the external auditor.
B. The audit programs, working papers, and reports of internal auditors may often be used
as a substitute for the work of the external auditor’s staff.
C. The procedures performed by the internal audit staff may eliminate the external auditor’s
need for considering internal control.
D. The work performed by internal auditors may be a factor in determining the nature,
timing, and extent of the external auditor’s procedures.

33. If the external auditor decides that it is efficient to consider how the work performed by the
internal auditors may affect the nature, timing, and extent of audit procedures, he/she should
assess the internal auditors’
A. Efficiency and experience C. Training and supervisory skills
B. Independence and review skills D. Competence and objectivity

34. Which of the following factors should an external auditor obtain updated information about
when assessing an internal auditor’s competence?
A. The reporting status of the internal auditor within the organization.
B. The educational level and professional experiences of the internal auditor.
C. Whether policies prohibit the internal auditor from auditing areas where relatives are
employed.
D. Whether the board of directors, audit committee, or owner-manager oversees
employment decisions related to the internal auditor.

35. Which of the following is an incorrect statement concerning the relationship of the internal
auditor and the scope of the external audit of an entity’s financial statements?
A. The external auditor is not required to give consideration to the internal audit function
beyond obtaining a sufficient understanding to identify and assess the risks of material
misstatement of the financial statements and to design and perform further audit
procedures.
B. The internal auditors may determine the extent to which audit procedures should be
employed by the external auditor.
C. Under certain circumstances, the internal auditors may assist the external auditor in
performing substantive tests and tests of controls.
D. The nature, timing, and extent of the external auditor’s substantive tests may be affected
by the work of internal auditors.

36. Which of the following is not an auditor’s expert upon whose work an auditor may rely?
A. Actuary C. Appraiser
B. Engineer D. Internal auditor

37. Which of the following statements is correct concerning an auditor’s use of the work of an
expert?
A. An auditor may not use an expert in the determination of physical characteristics relating
to inventories.
B. If there is a material difference between an expert’s findings and the assertions in the
financial statements, only an adverse opinion may be issued.
C. If an auditor believes that the determinations made by an expert are unreasonable, only
a qualified opinion may be issued.
D. The work of an expert who is related to the client may be acceptable under certain
circumstances.

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38. Which of the following statements is correct concerning the auditor’s use of the work of an
auditor’s expert?
A. The auditor is required to perform substantive test procedures to verify the expert’s
assumptions and findings.
B. The auditor should obtain an understanding of the methods and assumptions used by the
expert.
C. The entity should not have an understanding of the nature of the work to be performed
by the expert.
D. The expert should not have an understanding of the auditor’s corroborative use of the
expert’s findings.

39. If the results of the auditor’s expert’s work do not provide sufficient appropriate audit evidence
or are not consistent with other audit evidence, the auditor should
A. Report the matter to the appropriate regulatory agency of the government.
B. Resolve the matter.
C. Withdraw from the engagement.
D. Express an unqualified opinion with reference to the work of the expert.

40. When issuing an unmodified auditor’s report, the auditor

A. May refer to the work of an auditor’s expert.
B. Should refer to the work of an auditor’s expert to indicate a division of responsibility.
C. Should include in the auditor’s report the identity of the auditor’s expert and the extent of
the expert’s involvement.
D. Should not refer to the expert’s work.

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