Required and Additional Matters Included in the Group Engagement Team’s Letter of Instruction
Matters required by this Auditing Standard to be communicated to the component auditor are shown in italicised text.
Matters that are relevant to the planning of the work of the component auditor:
- A request for the component auditor, knowing the context in which the group engagement team will use the work of the component auditor, to confirm that the component auditor will co‑operate with the group engagement team.
- The timetable for completing the audit.
- Dates of planned visits by group management and the group engagement team, and dates of planned meetings with component management and the component auditor.
- A list of key contacts.
- The work to be performed by the component auditor, the use to be made of that work, and arrangements for coordinating efforts at the initial stage of and during the audit, including the group engagement team’s planned involvement in the work of the component auditor.
- [Deleted by the AUASB. Refer Aus 0.4][27]
- Aus 0.4 The ethical requirements that are relevant to the group audit and, in particular, the independence requirements. For example, since the use of internal auditors to provide direct assistance is prohibited in an audit or review conducted in accordance with the Australian Auditing Standards, it is relevant for the group auditor to address this prohibition in the communication to the component auditors, including those overseas.[#]
- In the case of an audit or review of the financial information of the component, component materiality (and, if applicable, the materiality level or levels for particular classes of transactions, account balances or disclosures), and the threshold above which misstatements cannot be regarded as clearly trivial to the group financial report.
- A list of related parties prepared by group management, and any other related parties that the group engagement team is aware of, and a request that the component auditor communicates on a timely basis to the group engagement team related parties not previously identified by group management or the group engagement team.
- Work to be performed on intra‑group transactions and unrealised profits and intra‑group account balances.
- Guidance on other statutory reporting responsibilities, for example reporting on group management’s assertion on the effectiveness of internal control.
- Where time lag between completion of the work on the financial information of the components and the group engagement team’s conclusion on the group financial report is likely, specific instructions for a subsequent events review.
Matters that are relevant to the conduct of the work of the component auditor:
- The findings of the group engagement team’s tests of controls of a processing system that is common for all or some components, and tests of controls to be performed by the component auditor.
- Identified significant risks of material misstatement of the group financial report, due to fraud or error, that are relevant to the work of the component auditor, and a request that the component auditor communicates on a timely basis any other significant risks of material misstatement of the group financial report, due to fraud or error, identified in the component and the component auditor’s response to such risks.
- The findings of the internal audit function, based on work performed on controls at or relevant to components.
- A request for timely communication of audit evidence obtained from performing work on the financial information of the components that contradicts the audit evidence on which the group engagement team originally based the risk assessment performed at group level.
- A request for a written representation on component management’s compliance with the applicable financial reporting framework, or a statement that differences between the accounting policies applied to the financial information of the component and those applied to the group financial report have been disclosed.
- Matters to be documented by the component auditor.
Other information
- A request that the following be reported to the group engagement team on a timely basis:
- Significant accounting, financial reporting and auditing matters, including accounting estimates and related judgements.
- Matters relating to the going concern status of the component.
- Matters relating to litigation and claims.
- Significant deficiencies in internal in control that the component auditor has identified during the performance of the work on the financial information of the component, and information that indicates the existence of fraud.
- A request that the group engagement team be notified of any significant or unusual events as early as possible.
- A request that the matters listed in paragraph 41 be communicated to the group engagement team when the work on the financial information of the component is completed.