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Answer d is incorrect the user auditor should be

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Answer (D) isincorrect. The user auditor should be satisfied about the service auditor’s independence and professional competence. [93] Gleim #: 9.4.76 An auditor (the user auditor) may decide to make use of another auditor’s (the service auditor’s) report on internal control at a service organization that provides certain services to the user auditor’s client. When the client’s transactions flow through the service organization’s accounting system, consideration of internal control may be necessary. The most efficient approach is often to obtain a service auditor’s report. Which of the following is a true statement about the relationship of the user and service auditors? A user auditor cannot treat a service auditor’s report as evidence if the period it covers does not coincide with that of the financial statements the user auditor has been engaged to audit. A.It is inappropriate for the user auditor to discuss with the service auditor the scope and results of the work. B.When reporting on an audit of financial statements, the user auditor should not refer to the service auditor’s report if the opinion is unmodified. C.The user auditor need not be concerned about fraud or noncompliance with laws and regulations at the service organization. D.Answer (A) isincorrect. When the timing of the service auditor’s report and the relevant financial statements do not coincide, the user auditor may still use the service auditor’s as audit evidence but, for example, should apply tests of controls for the period not covered. Answer (B) isincorrect. The user auditor may discuss with the service auditor the scope and results of the work or request that specific tests be made. Gleim CPA Test Prep:Auditing (200 questions) Copyright 2014 Gleim Publications Inc.Page 63 Printed for Willis Johnson
Answer (C) iscorrect. Because the service auditor is not responsible for auditing any portion of the financial statements being reported on by the user auditor, the service auditor should not be referred to in the user auditor’s report if the opinion is unmodified. But if the user auditor modifies the opinion because of a modified opinion by the service auditor, the user auditor may refer to the service auditor. Answer (D) isincorrect. The user auditor should inquire of management of the user entity about whether the user entity is aware of any fraud, noncompliance with laws and regulations, or uncorrected misstatements at the service organization affecting the financial statements of the user entity. [94] Gleim #: 9.4.79 Green, CPA, is auditing the financial statements of Ajax Co. Ajax uses the DP Service Center to process its payroll. DP’s financial statements are audited by Blue, CPA, who recently issued a report on DP’s policies and procedures regarding the processing of other entities’ transactions. In considering whether Blue’s report is satisfactory for Green’s purposes, Green should Make inquiries about Blue’s professional reputation.A.
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