ISA 600 Group Audit + Joint Audit Flashcards
What are the two major parts in which ISA 600 is sub-divided?
[ISA 600]
- Auditor’s Responsibilities when he audits group financial statements.
- Auditor’s Responsibilities when he involves other auditor
Give some examples of Components.
[ISA 600]
- Subsidiaries, Associates, Joint-Ventures,
- Branches.
- Products, services or geographical locations.
What is group auditor’s responsibility at time of acceptance/continuance?
[ISA 600]
To determine whether he will be able to obtain evidence on:
- financial information of all components.
- Consolidation process.
What matters should be considered by group auditor before making Acceptance and Continuance Decision?
[ISA 600]
Group Engagement Partner shall determine (by obtaining understanding of group) whether sufficient appropriate audit evidence can be obtained on:
- financial information of all components (including components for which component auditor is appointed), and
- consolidation process.
How understanding of Group can be obtained at Acceptance Stage?
[ISA 600]
Initial Audit:
Information/Communication from Group management, Previous group engagement team, Component management, Component auditor.
Recurring Audit:
- Changes in group structure, business activities, group-wide controls.
- Changes in management and TCWG.
- Changes in AFRF.
Can auditor obtain evidence if access to information at component is restricted?
[ISA 600]
- Is component is significant, evidence cannot be obtained.
- If component is not significant, evidence can be obtained if group engagement team has components’ F/S, Audit Report, information kept by group management.
Which additional matters should be agreed in Engagement Letter in case of Group Audit?
[ISA 700]
- Permission of Group Management to perform work on financial information of all component, and
- Unrestricted access to financial information of component, and its management.
- Permission to communicate with (or engage) component auditors, if needed.
Why Understanding of Group is necessary?
[ISA 600]
- To make Acceptance and Continuance Decision.
- To identify significant components,
- To assess Risks in Group F/S.
- To decide type of work to be performed on each component.
When obtaining understanding of a group, which aspects should be covered by group auditor?
[ISA 600]
- Group Structure (i.e. which components are significant and which are not).
- Group-wide controls.
- Consolidation Process.
When would you classify a component as Significant?
[ISA 600]
A component can be significant on:
(a) financial basis significance to the group (e.g. exceeding 15% of related benchmark), or
(b) risk basis (e.g. component dealing in foreign exchange trading).
How many materiality levels are required to be determined by Group Auditor?
[ISA 600]
- Materiality for Group F/S as whole (and Qualitative materiality for particular areas)
- Clearly Trivial Level for Group.
- Component Materiality (if component will be audited or reviewed).
- Performance Materiality of components may be determined by component auditor.*
Can materiality of a component be greater than material for group F/S?
[ISA 600]
No.
Does single materiality amount is used for all components?
[ISA 600]
No. Different components will have different materiality levels.
What type of work is performed on a component which is significant on financial basis?
[ISA 600]
Audit of component using component materiality.
What type of work is performed on a component which is significant on risk basis?
[ISA 600]
- Audit of component using component materiality or
- Audit of one or more account balances or classes of transactions which are likely to include risk, or
- Specific audit procedures relating to significant risk.
What type of work is performed on a component which are not significant?
[ISA 600]
Analytical procedures at group level. If no risks are identified as a result of analytical procedures, there is no need to perform any further procedure.
What should group auditor do if sufficient appropriate evidence cannot be obtained by performing procedures on significant and non-significant components? (e.g. when almost all components are non-significant)
[ISA 600]
Select not significant components, and perform one or more of following:
- audit of component using component materiality,
- review of component using component materiality,
- audit of one or more account balances or classes of transactions,
- specific audit procedures.
Which selecting non-significant components for audit or review or other audit procedures, what factors should be considered by group auditor?
[ISA 600]
- Whether component is comparatively significant.
- Whether the component has been newly formed or acquired.
- Whether significant changes have taken place in component.
- Whether abnormal fluctuations are identified by analytical procedures.
- Whether the internal audit function has performed work at the component.