However blaming the other auditor for any shoddy work on the Nexbis Malaysia subsidiary accounts is not a get-out-of-jail-free card for NBS here. ASA 600 Using the Work of Another Auditor states:
The principal auditor shall perform procedures to obtain sufficient appropriate audit evidence, that the work of the other auditor is adequate for the principal auditor’s purposes, in the context of the specific assignment. 15 Under paragraph 14 of this Auditing Standard, the principal auditor needs to advise the other auditor of: (a) the independence requirements regarding both the entity and the component and obtain written representation as to compliance with them; (b) the use that is to be made of the other auditor’s work and report and make sufficient arrangements for the coordination of their efforts at the initial planning stage of the audit; (c) matters such as areas requiring special consideration, procedures for the identification of intercompany transactions that may require disclosure and the timetable for completion of the audit; and the accounting, auditing and reporting requirements and endeavour to obtain written representation as to compliance with them. 16 The principal auditor might also, for example, discuss with the other auditor the audit procedures applied, review a written summary of the other auditor’s procedures (which may be in the form of a questionnaire or checklist) or review working papers of the other auditor. The principal auditor may wish to perform these procedures during a visit to the other auditor. The nature, timing and extent of audit procedures will depend on the circumstances of the engagement and the principal auditor’s knowledge of the professional competence of the other auditor. This knowledge may have been enhanced from the review of previous audit work of the other auditor. 17 The principal auditor may conclude that it is not necessary to apply procedures such as those described in paragraph 16 because sufficient appropriate audit evidence has previously been obtained that acceptable quality control policies and procedures are complied with in the conduct of the other auditor’s practice. For example, when they are affiliated firms the principal auditor and the other auditor may have a continuing, formal relationship providing for procedures that give that audit evidence such as periodic inter-firm review, tests of operating policies and procedures and review of working papers of selected audits.
It also states:
When the principal auditor concludes that the work of the other auditor cannot be used and the principal auditor has not been able to perform sufficient additional procedures regarding the financial information of the component audited by the other auditor, the principal auditor shall issue a modified auditor’s report because there is a limitation in the scope of the audit. 24 The principal auditor has sole responsibility for the opinion expressed on a consolidated financial report. If, having examined the financial reports and auditor’s reports of components for which the principal auditor has not acted as auditor, the principal auditor is not satisfied that the financial reports of any of these components are in form or content appropriate for the purpose of the preparation of a consolidated financial report, or if the principal auditor has not received satisfactory information and explanations to form such opinion, under ASA 701 Modifications to the Auditor’s Report, the principal auditor needs to modify the auditor’s report on the consolidated financial report. 25 When the other auditor issues, or intends to issue, a modified auditor’s report, the principal auditor shall consider: (a) the nature and significance of the modification, in relation to the financial report of the entity on which the principal auditor is reporting; and (b) whether a modification is also required to the principal auditor’s report, under ASA 701 Modifications to the Auditor’s Report.
(20min delay)