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group auditor and component auditor

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › group auditor and component auditor

  • This topic has 3 replies, 2 voices, and was last updated 6 years ago by Kim Smith.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • May 29, 2019 at 10:24 am #517781
    foeldh123
    Participant
    • Topics: 168
    • Replies: 76
    • ☆☆☆

    can the group auditor ask component auditor to re-perform the procedures if group auditor/EQCR finds it not reasonable ? e.g ineffective test of control

    and usually do group auditor ask the component auditor to reperform again even if it’s during completion stage where a few weeks or days the audit report will be issued ?

    May 29, 2019 at 10:55 am #517782
    Kim Smith
    Keymaster
    • Topics: 133
    • Replies: 8298
    • ☆☆☆☆☆

    The group auditor is responsible for the audit of the consolidated financial statements for the group and the audit of the parent’s financial statements. The component auditor plans and performs the audit of the component’s (e.g. subsidiary’s) financial statements in order to form an opinion on those financial statements. If the component auditor planned to perform tests of controls but found controls to be ineffective, they would have revert to a substantive approach in order to form their opinion.

    May 29, 2019 at 3:06 pm #517840
    foeldh123
    Participant
    • Topics: 168
    • Replies: 76
    • ☆☆☆

    that means group auditor will never perform the test on the subsidiary on behalf of component auditor ? group auditor can only rely the work done by component auditor after they have done additional procedures or not ?

    May 29, 2019 at 4:05 pm #517844
    Kim Smith
    Keymaster
    • Topics: 133
    • Replies: 8298
    • ☆☆☆☆☆

    If a component is significant to the group financial statement, the group auditor must obtain sufficient evidence that account balances/class or transactions are not materially misstated. The group auditor may may perform or request the component auditor to perform specific procedures. An example in ISA 600 is if there is a significant risk of material misstatement in the group financial statements due to inventory obsolescence (the component holds a large volume of potentially obsolete inventory). Although ISA 600 says that the group auditor may perform specified audit procedures on the valuation of inventory at the component, clearly the component auditor should in any case be auditing it.

    If, on the other hand, properties are carried at depreciated cost in the subsidiary’s books but the group policy is to revalue them, they would have to be revalued for the group accounts. There would be no reason for the component auditor to audit this unless requested to do so by the group auditor.

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