Document ID: chunk:federal_register_of_legislation:F2023C00341:reg:4:p6
Version: federal_register_of_legislation:F2023C00341
Segment Type: reg
Provision Reference: reg 4 (pt 6/42)
Character Range: 24596–27739

to perform work on the financial information of a component, the group engagement team shall obtain an understanding of the following:  (Ref: Para. A32‑A35)

(a)                Whether the component auditor understands and will comply with the ethical requirements that are relevant to the group audit and, in particular, is independent.  (Ref: Para. A37)

(b)                The component auditor's professional competence.  (Ref: Para. A38)

(c)                Whether the group engagement team will be able to be involved in the work of the component auditor to the extent necessary to obtain sufficient appropriate audit evidence.

(d)                Whether the component auditor operates in a regulatory environment that actively oversees auditors.  (Ref: Para. A36)

20.               If a component auditor does not meet the independence requirements that are relevant to the group audit, or the group engagement team has serious concerns about the other matters listed in paragraph 19(a)‑(c) of this Auditing Standard, the group engagement team shall obtain sufficient appropriate audit evidence relating to the financial information of the component without requesting that component auditor to perform work on the financial information of that component.  (Ref: Para. A39‑A41)

Materiality

21.               The group engagement team shall determine the following:  (Ref: Para. A42)

(a)                Materiality for the group financial report as a whole when establishing the overall group audit strategy.

(b)                If, in the specific circumstances of the group, there are particular classes of transactions, account balances or disclosures in the group financial report for which misstatements of lesser amounts than materiality for the group financial report as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the group financial report,  the materiality level or levels to be applied to those particular classes of transactions, account balances or disclosures.

(c)                Component materiality for those components where component auditors will perform an audit or a review for purposes of the group audit.  To reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements in the group financial report exceeds materiality for the group financial report as a whole, component materiality shall be lower than materiality for the group financial report as a whole.  (Ref: Para. A43‑A44)

(d)                The threshold above which misstatements cannot be regarded as clearly trivial to the group financial report.  (Ref: Para. A45)

22.               Where component auditors will perform an audit for purposes of the group audit, the group engagement team shall evaluate the appropriateness of performance materiality determined at the component level.  (Ref: Para. A46)

23.               If a component is subject to audit by statute, regulation or other reason, and the group engagement team decides to use that audit to provide audit evidence for the group audit, the group engagement team