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Hi
Suppose we have a parent and its 2 subsidiaries
Now the question is (correct me if wrong) the component auditor will audit each subsidiary individually right?
Then if thats the case, why do we need to have a group audit whilst each subsidiary had been audited and by using the audited subsidiaries we can consolidate?Assuming your scenario (all components are audited), someone still need to issue an opinion on group financial statements, which include also adjustments made at group level, disclosures, etc. Component auditor’s work does not cover these aspects.
Indeed, for some groups, work done by group auditor will be straightforward (not too much effort), but this will immediately will be reflected in the fee (low fee will be negociated for group audit).
For other groups, with complex intra-group transactions, with difficult judgements involved, with risks @ group level, group auditor will do sometimes more work than component auditors.
Long story short, group auditors are needed because group financial statements need to be audited. And component auditors do not express opinion on group financial statements.
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