Document ID: chunk:federal_register_of_legislation:F2025C00096:body:0:p52
Version: federal_register_of_legislation:F2025C00096
Segment Type: other
Provision Reference: 
Character Range: 149025–152380

determine the nature, timing and extent of the substantive procedures.

Consolidation Process

Consolidation Procedures (Ref: Para. 38)

 1.       The further audit procedures on the consolidation process, including sub-consolidations, may include:

           * Determining that the necessary journal entries are reflected in the consolidation; and

           * Evaluating the operating effectiveness of the controls over the consolidation process and responding appropriately if any controls are determined to be ineffective.

Consolidation Adjustments and Reclassifications (Ref: Para. 38(b))

 1.       The consolidation process may require adjustments and reclassifications to amounts reported in the group financial report that do not pass through the usual IT applications, and may not be subject to the same controls to which other financial information is subject.  The group auditor's evaluation of the appropriateness, completeness and accuracy of the adjustments and reclassifications may include:

           * Evaluating whether significant adjustments appropriately reflect the events and transactions underlying them;

           * Determining whether those entities or business units whose financial information has been included in the group financial report were appropriately included;

           * Determining whether significant adjustments have been correctly calculated, processed and authorised by group management and, when applicable, by component management;

           * Determining whether significant adjustments are properly supported and sufficiently documented; and

           * Evaluating the reconciliation and elimination of intra-group transactions, unrealised profits, and intra-group account balances.

Considerations When Component Auditors Are Involved (Ref: Para. 42–43)

 1.       When the group auditor involves component auditors in the design or performance of further audit procedures, the component auditor may determine that the use of the work of an auditor's expert is appropriate and communicate this to the group auditor.  In such circumstances, when determining whether the component auditor's design and performance of further audit procedures is appropriate, the group auditor may, for example, discuss with the component auditor:

           * The nature, scope and objectives of the auditor's expert's work.

           * The component auditor's evaluation of the adequacy of the work of the auditor's expert for the group auditor's purposes.

 1.       The appropriate level of the group auditor's involvement may depend on the circumstances and the structure of the group and other factors, such as the group auditor's previous experience with the component auditors that perform procedures on the consolidation process, including sub-consolidations, and the circumstances of the group audit engagement (e.g., 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).

Evaluating the Component Auditor's Communication and the Adequacy of Their Work

Communication about Matters Relevant to the Group Auditor's Conclusion with Regard to the Group Audit (Ref: Para. 45)

 1.       Although the matters required to be communicated in accordance with paragraph 45 are relevant to the