CHAPTER 26 USING THE WORK OF OTHERS I Review Questions An auditor who reports on the financial statements of a combined entity when he or she audited the major part of the combined entity is the principal auditor Auditing standards identify procedures to be followed by a principal auditor To be able to serve as auditor of a combined entity, an auditor must determine that he or she is able to be the principal auditor based on the materiality of the portion of the financial statements that he or she has examined, his or her knowledge of the overall financial statements, and the importance of the components he or she has audited The principal auditors must perform one or more of the following procedures:     Visit the auditor Review the audit programs Review audit work papers Perform additional audit procedures Refer to page 879 Refer to pages 879 to 880 While the external auditor has sole responsibility for the audit opinion expressed and for determining the nature, timing, and extent of external audit procedures, certain parts of internal auditing work may be useful to the external auditor The external auditor should obtain a sufficient understanding of internal audit activities to assist in planning the audit and developing an effective audit approach Effective internal auditing will often allow a modification in the nature and timing, and a reduction in the extent of procedures performed by the external auditor but cannot eliminate them entirely In some cases, however, having considered the activities of internal auditing, the external auditor may decide that internal auditing will have no effect on external audit procedures The external auditor’s preliminary assessment of the internal audit function will influence the external auditor’s judgment about the use which may be made of internal auditing in modifying the nature, timing and extent of external audit procedures 26-2 Solutions Manual - Assurance Principles, Professional Ethics… II Multiple Choice Questions c b d b b c III Comprehensive Cases a Tan should ask San Nicolas to authorize Andres to respond fully to her inquiries If San Nicolas refuses or limits the responses, Tan should request San Nicolas to explain the reasons After obtaining the explanation, Tan should consider whether to continue pursuing the engagement b Tan will have to (1) obtain additional information about the client and possibly about the industry, which Andres would have obtained in prior years, (2) make a more detailed evaluation of whether to accept this client, (3) obtain information about the client’s internal control, which Andres would have obtained in prior years, and (4) obtain evidence about beginning balance sheet balances, which Andres would have obtained in prior years  ...26-2 Solutions Manual - Assurance Principles, Professional Ethics… II Multiple Choice Questions c b d b b