Responding to the Assessed Risks of MateResponding to the Assessed Risks of Material Misstatement

Responding to the Assessed Risks of Material Misstatement

1. In applying ASA 330,[27] the group auditor shall take responsibility for the nature, timing and extent of further audit procedures to be performed, including determining the components at which to perform further audit procedures and the nature, timing and extent of the work to be performed at those components. (Ref: Para. A124–A139)

Consolidation Process

1. The group auditor shall take responsibility for designing and performing further audit procedures to respond to the assessed risks of material misstatement of the group financial report arising from the consolidation process. This shall include: (Ref: Para. A140)
   1. Evaluating whether all entities and business units have been included in the group financial report as required by the applicable financial reporting framework and, if applicable, for designing and performing further audit procedures on sub-consolidations;
   2. Evaluating the appropriateness, completeness and accuracy of consolidation adjustments and reclassifications; (Ref: Para. A141)
   3. Evaluating whether management’s judgements made in the consolidation process give rise to indicators of possible management bias; and
   4. Responding to assessed risks of material misstatement due to fraud arising from the consolidation process.
2. If the financial information of an entity or business unit has not been prepared in accordance with the same accounting policies applied to the group financial report, the group auditor shall evaluate whether the financial information has been appropriately adjusted for purposes of preparing and presenting the group financial report.
3. If the group financial report includes the financial information of an entity or business unit with a financial reporting period-end that differs from that of the group, the group auditor shall take responsibility for evaluating whether appropriate adjustments have been made to that financial information in accordance with the applicable financial reporting framework.

Considerations When Component Auditors Are Involved

1. When the group auditor involves component auditors in the design or performance of further audit procedures, the group auditor shall communicate with the component auditor about matters that the group auditor or component auditor determine to be relevant to the design of responses to the assessed risks of material misstatement of the group financial report.
2. For areas of higher assessed risks of material misstatement of the group financial report, or significant risks identified in accordance with ASA 315, on which a component auditor is determining the further audit procedures to be performed, the group auditor shall evaluate the appropriateness of the design and performance of those further audit procedures. (Ref: Para. A142)