Document ID: chunk:federal_register_of_legislation:F2023C00341:reg:4:p8
Version: federal_register_of_legislation:F2023C00341
Segment Type: reg
Provision Reference: reg 4 (pt 8/42)
Character Range: 30296–33578

Significant Components

28.               For components that are not significant components, the group engagement team shall perform analytical procedures at group level.  (Ref: Para. A50)

29.               If the group engagement team does not consider that sufficient appropriate audit evidence on which to base the group audit opinion will be obtained from:

(a)                the work performed on the financial information of significant components;

(b)                the work performed on group‑wide controls and the consolidation process; and

(c)                the analytical procedures performed at group level,

    the group engagement team shall select components that are not significant components and shall perform, or request a component auditor to perform, one or more of the following on the financial information of the individual components selected:  (Ref: Para. A51‑A53)

           * An audit of the financial information of the component using component materiality.

           * An audit of one or more account balances, classes of transactions or disclosures.

           * A review of the financial information of the component using component materiality.

           * Specified procedures.

The group engagement team shall vary the selection of components over a period of time.

Involvement in the Work Performed by Component Auditors  (Ref: Para. A54‑A55)

Significant Components—Risk Assessment

30.               If a component auditor performs an audit of the financial information of a significant component, the group engagement team shall be involved in the component auditor's risk assessment to identify significant risks of material misstatement of the group financial report.  The nature, timing and extent of this involvement are affected by the group engagement team's understanding of the component auditor, but at a minimum shall include:

(a)                Discussing with the component auditor or component management those of the component's business activities that are significant to the group;

(b)                Discussing with the component auditor the susceptibility of the component to material misstatement of the financial information due to fraud or error; and

(c)                Reviewing the component auditor's documentation of identified significant risks of material misstatement of the group financial report.  Such documentation may take the form of a memorandum that reflects the component auditor's conclusion with regard to the identified significant risks.

Identified Significant Risks of Material Misstatement of the Group Financial Report—Further Audit Procedures

31.               If significant risks of material misstatement of the group financial report have been identified in a component on which a component auditor performs the work, the group engagement team shall evaluate the appropriateness of the further audit procedures to be performed to respond to the identified significant risks of material misstatement of the group financial report.  Based on its understanding of the component auditor, the group engagement team shall determine whether it is necessary to be involved in the further audit procedures.

Consolidation Process

32.               In accordance with paragraph 17 of