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Just say there is a component subsidiary that has PBT, revenue and total assets all around 14% of the Groups total, and as a result it is considered not significant. And then the component’s entire PBT turns out to be misstated. At 14% of Group PBT is this not a material misstatement in the Group FS?
Well for it “all” to be misstated you are saying, for example that if the 14% profit is $ 1 million that it should actually be zero. I suggest that that’s not terribly likely. Also remember that even though from a group perspective the benchmark for a material component is 15% – that is only a guideline. If there were 4 subsids – all 14% – it would be foolhardly to ignore all because they are less that 14%.
Also remember that someone will be auditing the component and the component auditor will, for example, report to the group auditor their schedule of uncorrected misstatements.Thanks. So when the component auditor reports to you their schedule of uncorrected misstatements, would you still go through them to make sure that they do not, on their own or in aggregate, mean there would be a material misstatement in the Group FS?
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