Section Responding to Assessed Risks - ASA 600 - Special Considerations – Audits of a Group Financial Report (Including the Work of Component Auditors) - October 2009 - Responding to Assessed Risks | Zoe
ASA 600 - Special Considerations – Audits of a Group Financial Report (Including the Work of Component Auditors) - October 2009
Responding to Assessed RisksResponding to Assessed Risks
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The auditor is required to design and implement appropriate responses to address the assessed risks of material misstatement of the financial report.[10] The group engagement team shall determine the type of work to be performed by the group engagement team, or the component auditors on its behalf, on the financial information of the components, see paragraphs 26‑29 of this Auditing Standard. The group engagement team shall also determine the nature, timing and extent of its involvement in the work of the component auditors, see paragraphs 30‑31 of this Auditing Standard.
If the nature, timing and extent of the work to be performed on the consolidation process or the financial information of the components are based on an expectation that group‑wide controls are operating effectively, or if substantive procedures alone cannot provide sufficient appropriate audit evidence at the assertion level, the group engagement team shall test, or request a component auditor to test, the operating effectiveness of those controls.
Determining the Type of Work to Be Performed on the Financial Information of Components (Ref: Para. A47)
Significant Components
For a component that is significant due to its individual financial significance to the group, the group engagement team, or a component auditor on its behalf, shall perform an audit of the financial information of the component using component materiality.
For a component that is significant because it is likely to include significant risks of material misstatement of the group financial report due to its specific nature or circumstances, the group engagement team, or a component auditor on its behalf, shall perform one or more of the following:
An audit of the financial information of the component using component materiality.
An audit of one or more account balances, classes of transactions or disclosures relating to the likely significant risks of material misstatement of the group financial report. (Ref: Para. A48)
Specified audit procedures relating to the likely significant risks of material misstatement of the group financial report. (Ref: Para. A49)
Components that Are Not Significant Components
For components that are not significant components, the group engagement team shall perform analytical procedures at group level. (Ref: Para. A50)
If the group engagement team does not consider that sufficient appropriate audit evidence on which to base the group audit opinion will be obtained from:
the work performed on the financial information of significant components;
the work performed on group‑wide controls and the consolidation process; and
the analytical procedures performed at group level,
the group engagement team shall select components that are not significant components and shall perform, or request a component auditor to perform, one or more of the following on the financial information of the individual components selected: (Ref: Para. A51‑A53)
An audit of the financial information of the component using component materiality.
An audit of one or more account balances, classes of transactions or disclosures.
A review of the financial information of the component using component materiality.
Specified procedures.
The group engagement team shall vary the selection of components over a period of time.
Involvement in the Work Performed by Component Auditors (Ref: Para. A54‑A55)
Significant Components—Risk Assessment
If a component auditor performs an audit of the financial information of a significant component, the group engagement team shall be involved in the component auditor’s risk assessment to identify significant risks of material misstatement of the group financial report. The nature, timing and extent of this involvement are affected by the group engagement team’s understanding of the component auditor, but at a minimum shall include:
Discussing with the component auditor or component management those of the component’s business activities that are significant to the group;
Discussing with the component auditor the susceptibility of the component to material misstatement of the financial information due to fraud or error; and
Reviewing the component auditor’s documentation of identified significant risks of material misstatement of the group financial report. Such documentation may take the form of a memorandum that reflects the component auditor’s conclusion with regard to the identified significant risks.
Identified Significant Risks of Material Misstatement of the Group Financial Report—Further Audit Procedures
If significant risks of material misstatement of the group financial report have been identified in a component on which a component auditor performs the work, the group engagement team shall evaluate the appropriateness of the further audit procedures to be performed to respond to the identified significant risks of material misstatement of the group financial report. Based on its understanding of the component auditor, the group engagement team shall determine whether it is necessary to be involved in the further audit procedures.