Types of Audit Opinions Bacon, CPAs, is the principal auditor for Martin Industries, a U.S. public company. However, Bacon decides to refer to the work of Hsu and Wen, CPAs, who audited a wholly owned subsidiary of the entity and issued an unqualified opinion. REQUIRED: Which type of audit report would you suggest be issued this year and why?

Answer 1

Since the principal audit firm chooses to mention the other firm in the audit report, the wording of the standard unqualified report is modified, and no additional paragraph is needed. The resulting opinion is unqualified unless there are other reasons for expressing a different opinion. The most extensive change appears in the introductory paragraph to indicate the shared responsibility for the overall opinion, including the magnitude of the amounts audited by the other firm. The scope and opinion paragraphs are also modified to reference the other auditor.
For nonpublic clients, the extensive change would appear in the auditor's responsibility section; and the opinion paragraph would include a reference to the other auditor.
The name of the other audit firm is mentioned only with its express permission and if its report is also included in the document.