A subsidiary uses an auditor different from its parent. When the parent prepares CFS (Consolidated Financial Statements), the parent's auditor must:
AUse SA 600 (R) framework: communicate with subsidiary's auditor, evaluate competence and obtain understanding of work performed
BRe-audit the subsidiary fully
CRefuse to issue an opinion on CFS
DDrop the subsidiary from CFS
Answer & Solution
Correct answer: B. Re-audit the subsidiary fully
1. SA 600 (R) governs principal-component auditor relationship.
2. Communication, evaluation of competence and obtaining understanding are mandatory.
3. Re-audit, refusal, or dropping the subsidiary are improper.
_Source: ICAI BoS CA Final Paper 3, Ch 5 "Company Audit"_
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