Accounting Q&A · Auditing · Topic 11
Practise group audit risk, component auditors and joint auditor responsibilities. Try each answer before revealing it.
Worked example
A foreign component uses a local auditor. Assess competence, ethics, access and communications. Specify scope and evaluate findings before forming the group opinion.
Core concepts
1. What should you know about group audit?
An audit of group financial statements.
2. What should you know about group auditor?
Responsible for managing and achieving quality on the group audit and for the group opinion.
3. What should you know about component?
An entity, unit, function or activity determined for planning and performing group audit work.
4. What should you know about component auditor?
An auditor performing work related to a component for the group audit.
5. What should you know about group audit strategy?
The approach to risks, resources, involvement and work across the group.
6. What should you know about component performance materiality?
An amount set to address aggregation risk for relevant component work.
7. What should you know about consolidation process?
Combines component information and processes adjustments and eliminations.
8. What should you know about aggregation risk?
Risk that individually smaller misstatements add to a material total.
9. What should you know about joint audit?
Multiple firms are appointed under an applicable arrangement to audit and report.
10. What should you know about work allocation?
A documented division of procedures that still requires coordination and review.
Case 1
A foreign component uses a local auditor.
11. Which audit concept is central here?
Component auditor involvement.
12. What is the main objective?
Determine whether the group team can direct, supervise and review the work appropriately.
13. What evidence or procedure would you use?
Assess competence, ethics, access and communications.
14. What limitation should you consider?
A local opinion alone does not satisfy group audit requirements.
15. What should happen next?
Specify scope and evaluate findings before forming the group opinion.
Case 2
Intercompany sales remain in consolidated revenue.
16. Which audit concept is central here?
Consolidation controls.
17. What is the main objective?
Test whether intragroup amounts are eliminated.
18. What evidence or procedure would you use?
Reconcile both sides and inspect elimination entries.
19. What limitation should you consider?
Individual component records can be correct while consolidation is wrong.
20. What should happen next?
Quantify the error and request correction.
Case 3
Two joint auditors split inventory and revenue work.
21. Which audit concept is central here?
Joint audit coordination.
22. What is the main objective?
Ensure overlapping risks such as cut-off are addressed.
23. What evidence or procedure would you use?
Agree allocation, review and issue escalation.
24. What limitation should you consider?
Dividing work does not remove applicable shared responsibilities.
25. What should happen next?
Coordinate conclusions before issuing the report.
Professional standards reference. For statutory duties, confirm the rules in the relevant jurisdiction.