Requirements

Includes: Leadership Responsibilities for Managing and Achieving Quality on a Group Audit, Acceptance and Continuance, Overall Group Audit Strategy and Group Audit Plan, Understanding the Group and Its Environment, the Applicable Financial Reporting Framework and the Group’s System of Internal Control

Leadership Responsibilities for Managing and Achieving Quality on a Group Audit

16

In applying ASA 220,[13] the group engagement partner is required to take overall responsibility for managing and achieving quality on the group audit engagement. In doing so, the group engagement partner shall: (Ref: Para. A29–A30)

  1. Take responsibility for creating an environment for the group audit engagement that emphasises the expected behaviour of engagement team members. (Ref: Para. A31)
  2. Be sufficiently and appropriately involved throughout the group audit engagement, including in the work of component auditors, such that the group engagement partner has the basis for determining whether the significant judgements made, and the conclusions reached, are appropriate given the nature and circumstances of the group audit engagement.

13

See ASA 220, paragraph 13.

Acceptance and Continuance

17

Before accepting or continuing the group audit engagement, the group engagement partner shall determine whether sufficient appropriate audit evidence can reasonably be expected to be obtained to provide a basis for forming an opinion on the group financial report. (Ref: Para. A32–A35)

18

If, after the acceptance or continuance of the group audit engagement, the group engagement partner concludes that sufficient appropriate audit evidence cannot be obtained, the group engagement partner shall consider the possible effects on the group audit. (Ref: Para. A36)

Terms of the Engagement

19

In applying ASA 210,[14] the group auditor shall obtain the agreement of group management that it acknowledges and understands its responsibility to provide the engagement team with: (Ref: Para. A37)

  1. Access to all information of which group management is aware that is relevant to the preparation of the group financial report such as records, documentation and other matters;
  2. Additional information that the engagement team may request from group management or component management for the purpose of the group audit; and
  3. Unrestricted access to persons within the group from whom the engagement team determines it necessary to obtain audit evidence.

14

See ASA 210 Agreeing the Terms of Audit Engagements, paragraphs 6(b) and 8(b).

Restrictions on Access to Information or People Outside the Control of Group Management

20

If the group engagement partner concludes that group management cannot provide the engagement team with access to information or unrestricted access to persons within the group due to restrictions that are outside the control of group management, the group engagement partner shall consider the possible effects on the group audit. (Ref: Para. A38–A46)

Restrictions on Access to Information or People Imposed by Group Management

21

If the group engagement partner concludes that: (Ref: Para. A43–A46)

  1. It will not be possible for the group auditor to obtain sufficient appropriate audit evidence due to restrictions imposed by group management; and
  2. The possible effect of this limitation will result in a disclaimer of opinion on the group financial report,
  3. the group engagement partner shall either:
    1. In the case of an initial engagement, not accept the engagement, or, in the case of a recurring engagement, withdraw from the engagement, when withdrawal is possible under applicable law or regulation; or
    2. When law or regulation prohibit an auditor from declining an engagement or when withdrawal from an engagement is not otherwise possible, having performed the audit of the group financial report to the extent possible, disclaim an opinion on the group financial report.

Overall Group Audit Strategy and Group Audit Plan

22

In applying ASA 300,[15] the group auditor shall establish, and update as necessary, an overall group audit strategy and group audit plan. In doing so, the group auditor shall determine: (Ref: Para. A47–A50)

  1. The components at which audit work will be performed; and (Ref: Para. A51)
  2. The resources needed to perform the group audit engagement, including the nature, timing and extent to which component auditors are to be involved. (Ref: Para. A52–A56)

15

See ASA 300, paragraphs 7–11.

Considerations When Component Auditors Are Involved

23

In establishing the overall group audit strategy and group audit plan, the group engagement partner shall evaluate whether the group auditor will be able to be sufficiently and appropriately involved in the work of the component auditor. (Ref: Para. A57)

24

As part of the evaluation in paragraph 23, the group auditor shall request the component auditor to confirm that the component auditor will cooperate with the group auditor, including whether the component auditor will perform the work requested by the group auditor. (Ref: Para. A58)

Relevant Ethical Requirements, Including Those Related to Independence

25

In applying ASA 220,[16] the group engagement partner shall take responsibility for: (Ref: Para. A59–A60, A87)

  1. Component auditors having been made aware of relevant ethical requirements that are applicable given the nature and circumstances of the group audit engagement; and
  2. Confirming whether the component auditors understand and will comply with the relevant ethical requirements, including those related to independence, that apply to the group audit engagement.

16

See ASA 220, paragraph 17.

Engagement Resources

26

In applying ASA 220,[17] the group engagement partner shall: (Ref: Para. A61–A68)

  1. Determine that component auditors have the appropriate competence and capabilities, including sufficient time, to perform the assigned audit procedures at the component; and
  2. If information about the results of the monitoring and remediation process or external inspections related to the component auditor has been provided by the group auditor’s firm or has otherwise been made available to the group engagement partner, determine the relevance of such information to the group auditor’s determination in paragraph 26(a).

17

See ASA 220, paragraphs 25–26.

27

The group auditor shall obtain sufficient appropriate audit evidence relating to the work to be performed at the component without involving the component auditor if:

  1. The component auditor does not comply with the relevant ethical requirements, including those related to independence, that apply to the group audit engagement;[18] or (Ref: Para. A69–A70)
  2. The group engagement partner has serious concerns about the matters in paragraphs 23–26. (Ref: Para. A71)

18

See ASA 200, paragraph 14.

Engagement Performance

28

In applying ASA 220,[19] the group engagement partner shall take responsibility for the nature, timing and extent of direction and supervision of component auditors and the review of their work, taking into account: (Ref: Para. A72–A77)

  1. Areas of higher assessed risks of material misstatement of the group financial report, or significant risks identified in accordance with ASA 315; and
  2. Areas in the audit of the group financial report that involve significant judgement.

19

See ASA 220, paragraph 29.

Communications with Component Auditors

29

The group auditor shall communicate with component auditors about their respective responsibilities and the group auditor's expectations, including an expectation that communications between the group auditor and component auditors take place at appropriate times throughout the group audit. (Ref: Para. A78–A87)

Understanding the Group and Its Environment, the Applicable Financial Reporting Framework and the Group’s System of Internal Control

30

In applying ASA 315,[20] the group auditor shall take responsibility for obtaining an understanding of the following: (Ref: Para. A88–A92)

  1. The group and its environment, including: (Ref: Para. A93–A95)
    1. The group’s organisational structure and its business model, including:
      1. The locations in which the group has its operations or activities;
      2. The nature of the group’s operations or activities and the extent to which they are similar across the group; and
      3. The extent to which the group’s business model integrates the use of information technology (IT);
    2. Regulatory factors impacting the entities and business units in the group; and
    3. The measures used internally and externally to assess the financial performance of the entities or business units;
  2. The applicable financial reporting framework and the consistency of accounting policies and practices across the group; and
  3. The group’s system of internal control, including:
    1. The nature and extent of commonality of controls; (Ref: Para. A96–A99, A102)
    2. Whether, and if so, how, the group centralises activities relevant to financial reporting; (Ref: Para. A100–A102)
    3. The consolidation process used by the group, including sub-consolidations, if any, and consolidation adjustments; and
    4. How group management communicates significant matters that support the preparation of the group financial report and related financial reporting responsibilities in the information system and other components of the group’s system of internal control to management of entities or business units. (Ref: Para. A103–A105)

20

See ASA 315, paragraphs 19–27.

Considerations When Component Auditors Are Involved

31

The group auditor shall communicate to component auditors on a timely basis: (Ref: Para. A106)

  1. Matters that the group auditor determines to be relevant to the component auditor’s design or performance of risk assessment procedures for purposes of the group audit;
  2. In applying ASA 550,[21] related party relationships or transactions identified by group management, and any other related parties of which the group auditor is aware, that are relevant to the work of the component auditor; and (Ref: Para. A107)
  3. In applying ASA 570,[22] events or conditions identified by group management or the group auditor that may cast significant doubt on the group’s ability to continue as a going concern that are relevant to the work of the component auditor.

21

See ASA 550 Related Parties, paragraph 17.

22

See ASA 570 Going Concern.

32

The group auditor shall request component auditors to communicate on a timely basis:

  1. Matters related to the financial information of the component that the component auditor determines to be relevant to the identification and assessment of the risks of material misstatement of the group financial report, whether due to fraud or error;
  2. Related party relationships not previously identified by group management or the group auditor; and (Ref: Para. A107)
  3. Any events or conditions identified by the component auditor that may cast significant doubt on the group’s ability to continue as a going concern.