Auditing and Assurance Services 9th Edition by Alvin Arens,Mark Beasley,Randy Elder

Exercise 12

The CPA firm of May Marty has audited the consolidated financial statements of BGI Corporation, a private company. May Marty examined the parent company and all subsidiaries except for BGI-Western Corporation, which was audited by the CPA firm of Dey Dee. BGI-Western constituted approximately 10 percent of the consolidated assets and 6 percent of the consolidated revenue.
Dey Dee issued an unmodified opinion on the financial statements of BGI-Western. May Marty will be issuing an unmodified opinion on the consolidated financial statements of BGI.
Required:
a. What procedures should May Marty consider performing with respect to Dey Dee's examination of BGI-Western's financial statements regardless of whether reference is to be made to the other auditors?
b. Describe the various circumstances under which May Marty could take responsibility for the work of Dey Dee and make no reference to Dey Dee's examination of BGI-Western in its own report on the consolidated financial statements of BGI.
(AICPA, adapted)