An auditor expresses an unqualified opinion on the financial statements of a pub

Question

An auditor expresses an unqualified opinion on the financial statements of a publically held client. Subsequent to the audit, the client files for bankruptcy protection. If the bankruptcy was caused by poor internal controls at a service provider, the auditor may use as a valid defense which of the following?

a. It relied on the work of another auditor.

b. It extended its testing of the client’s internal control environment.

c. It extended its testing of client internal controls by performing tests of controls at the service provider.

d. The service provider has a SAS 70 report.

Explanation / Answer

option (c) is coorrect

auditior may uses valid defence by testing client internal control by performing tests of controls at the service

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