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CS Professional · Compliance Management, Audit and Due Diligence · Audit Engagement

Bharat Infra Ltd. is a wholly owned subsidiary of Hind Holdings Ltd. The same audit firm audits both. The subsidiary's board appoints the auditor and a separate auditor's report is issued on the subsidiary, though its management has little independence from the parent. The firm is deciding whether to send a separate engagement letter to the subsidiary. Which factor is NOT listed in SA 210 as influencing this decision?

The relationship of the component's net worth to the audit fee is not a listed factor. SA 210 lists who appoints the component auditor, whether a separate report is issued, legal requirements on appointments, parent's degree of ownership, and the independence of component management from the parent.

  1. AWhether a separate auditor's report is to be issued on the component
  2. BWho appoints the component auditor
  3. CThe degree of ownership by the parent
  4. DThe size of the component's net worth relative to the audit feeCorrect

Explanation

SA 210 lists these factors: who appoints the component auditor, whether a separate report is issued, legal requirements on audit appointments, degree of ownership by the parent, and degree of independence of component management from the parent. Comparison of net worth with audit fee is not listed.

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