Document ID: chunk:federal_register_of_legislation:F2023C00341:reg:4:p21
Version: federal_register_of_legislation:F2023C00341
Segment Type: reg
Provision Reference: reg 4 (pt 21/42)
Character Range: 68100–71375

for the group financial reports and, where not, how differences in accounting policies are identified and adjusted (where required by the applicable financial reporting framework).

           * Discuss fraud that has been identified in components, or information that indicates existence of a fraud in a component.

           * Share information that may indicate non‑compliance with national laws or regulations, for example payments of bribes and improper transfer pricing practices.

Risk Factors (Ref: Para. 18)

A30.         Appendix 3 sets out examples of conditions or events that, individually or together, may indicate risks of material misstatement of the group financial report, including risks due to fraud.

Risk Assessment (Ref: Para. 18)

A31.         The group engagement team's assessment at group level of the risks of material misstatement of the group financial report is based on information such as the following:

           * Information obtained from the understanding of the group, its components, and their environments, and of the consolidation process, including audit evidence obtained in evaluating the design and implementation of group‑wide controls and controls that are relevant to the consolidation.

           * Information obtained from the component auditors.

Understanding the Component Auditors (Ref: Para. 19)

A32.         The group engagement team obtains an understanding of a component auditor only when it plans to request the component auditor to perform work on the financial information of a component for the group audit.  For example, it will not be necessary to obtain an understanding of the auditors of those components for which the group engagement team plans to perform analytical procedures at group level only.

Group Engagement Team's Procedures to Obtain an Understanding of the Component Auditor and Sources of Audit Evidence (Ref: Para. 19)

A33.         The nature, timing and extent of the group engagement team's procedures to obtain an understanding of the component auditor are affected by factors such as previous experience with or knowledge of the component auditor, and the degree to which the group engagement team and the component auditor are subject to common policies and procedures, for example:

           * Whether the group engagement team and a component auditor share:

                   + Common policies and audit procedures for performing the work (for example, audit methodologies);

                   + Common quality control policies and procedures; or

                   + Common monitoring policies and procedures.

           * The consistency or similarity of:

                   + Laws and regulations or legal system;

                   + Professional oversight, discipline, and external quality assurance;

                   + Education and training;

                   + Professional organisations and standards; and

                   + Language and culture.

A34.         These factors interact and are not mutually exclusive.  For example, the extent of the group engagement team's procedures to obtain an understanding of Component Auditor A, who consistently applies common quality control and monitoring policies and procedures and a common audit methodology