Lando Corporation is a domestic company with two wholly owned domestic subsidiaries. Michaels, CPA, has been engaged to audit the financial statements of the parent company and one of the subsidiaries and to act as the group auditors. Thomas, CPA, has audited financial statements of the other subsidiary. Michaels has not yet decided whether to make reference to the audit of Thomas.
a. What audit procedures should Michaels perform with respect to the component auditor, regardless of whether Michaels decides to make reference to Thomas in the report?
b. What modifications are made to the audit report if Michaels decides to make reference to the audit of Thomas?