Document ID: chunk:federal_register_of_legislation:F2025C00096:body:0:p40
Version: federal_register_of_legislation:F2025C00096
Segment Type: other
Provision Reference: 
Character Range: 114759–117905

cast significant doubt on the group's ability to continue as a going concern.

           * Discuss related party relationships or transactions identified by group management or component management, and any other related parties of which the engagement team is aware.

The Group and Its Environment (Ref: Para. 30 (a))

 1.          An understanding of the group's organisational structure and its business model may enable the group auditor to understand such matters as:

           * The complexity of the group's structure.  A group may be more complex than a single entity because a group may have several subsidiaries, divisions or other business units, including in multiple locations.  Also, a group's legal structure may be different from the operating structure, for example, for tax purposes.  Complex structures often introduce factors that may give rise to increased susceptibility to material misstatements, such as whether goodwill, joint ventures or special-purpose entities are accounted for appropriately and whether adequate disclosures have been made.

           * The geographic locations of the group's operations.  Having a group that is located in multiple geographical locations may give rise to increased susceptibility to material misstatements.  For example, different geographical locations may involve different languages, cultures and business practices.

           * The structure and complexity of the group's IT environment.  A complex IT environment often introduces factors that may give rise to increased susceptibility to material misstatements.  For example, a group may have a complex IT environment because of multiple IT systems that are not integrated due to recent acquisitions or mergers.  Therefore, it may be particularly important to obtain an understanding of the complexity of the security over the IT environment, including vulnerability of the IT applications, databases, and other aspects of the IT environment.  A group may also use one or more external service providers for aspects of its IT environment.

           * Relevant regulatory factors, including the regulatory environment.  Different laws or regulations may introduce factors that may give rise to increased susceptibility to material misstatements.  A group may have operations that are subject to a high degree of complex laws or regulations in multiple jurisdictions, or entities or business units in the group that operate in multiple industries that are subject to different types of laws or regulations.

           * The ownership, and relationships between owners and other people or entities, including related parties.  Understanding the ownership and relationships can be more complex in a group that operates across multiple jurisdictions and when there are changes in ownership through formation, acquisition, disposal or joint venture.  These factors may give rise to increased susceptibility to material misstatements.

 1.          Obtaining an understanding of the degree to which the group's operations or activities are similar may help to identify similar risks of material misstatement across components