Chapter 9 Flashcards
whats a component auditor
an auditor who at the request of the group engagement team, performs work on financial info related to a component of the group audit
what does a group have to do in terms of an audit
the parent needs its own audited FS and then a consolidated group FS
what will the group audit team need to determine in respect of the component auditor
how much reliance they can put on their work.
what can the group auditor do if the component auditors have posed a significant threat of material misstatement
stipulate further audit procedures must be carried out
or
the extent the component auditors are involved ( if at all )
what is a significant component
a component identified by the group engagement team that is of significance to the group or that its likely to include significant risks to the material misstatement of the group
what is the benchmark to determine if the component is significant
if the component assets, liabs, cash flows, profit or turnover exceed 15% of the group figure
what will the group audit require of a significant component
low risk - specified procedures to identify significant risks
medium risk - an audit of specified account balances to identify significant risks
high risk - a full audit
what do the group auditors need to assess of the component auditors
whether they are independant
whether they are competent
whether the group engagement team will be involved in the work of the component auditors
whether they operate in a regulatory environment
basic rule of group auditors
where the component is significant, the group auditor must be involved in the component auditors work
do the group auditors have to review the component audit
yes - normally by a questionnaire or report from the component auditors highlighting key issues
what could be the outcome of the group review of components work
designing more audit procedures
reviewing other documents
going to meetings with component and auditors
when are interim FS be required
when a component of the parent has a different year end of more than 3 months
what to consider before accepting to be a parent company auditor
a good understanding of the group should be obtained before accepting
what are the issues due to when a component is located abroad
different accounting policies might be used abroad
there may be cultural/ language barriers
issues specific to that country such as hyperinflation
what would happen if the component had a modificaiton that had no material impact on the group
it would remain unmodified
