Document ID: chunk:federal_register_of_legislation:F2023C00341:reg:4:p18
Version: federal_register_of_legislation:F2023C00341
Segment Type: reg
Provision Reference: reg 4 (pt 18/42)
Character Range: 59056–62331

the group engagement team's inability to obtain sufficient appropriate audit evidence in relation to a significant component accounted for by the equity method of accounting, but where, in the group engagement team's judgement, the effect is material but not pervasive.

Terms of Engagement (Ref: Para. 14)

A20.         The terms of engagement identify the applicable financial reporting framework.[16]  Additional matters may be included in the terms of a group audit engagement, such as the fact that:

           * The communication between the group engagement team and the component auditors should be unrestricted to the extent possible under law or regulation;

           * Important communications between the component auditors, those charged with governance of the component, and component management, including communications on significant deficiencies in internal control, should be communicated as well to the group engagement team;

           * Important communications between regulatory authorities and components related to financial reporting matters should be communicated to the group engagement team; and

           * To the extent the group engagement team considers necessary, it should be permitted:

                   + Access to component information, those charged with governance of components, component management, and the component auditors (including relevant audit documentation sought by the group engagement team); and

                   + To perform work or request a component auditor to perform work on the financial information of the components.

A21.         Restrictions imposed on:

           * the group engagement team's access to component information, those charged with governance of components, component management, or the component auditors (including relevant audit documentation sought by the group engagement team); or

           * the work to be performed on the financial information of the components,

    after the group engagement partner's acceptance of the group audit engagement, constitute an inability to obtain sufficient appropriate audit evidence that may affect the group audit opinion.  In exceptional circumstances it may even lead to withdrawal from the engagement where withdrawal is possible under applicable law or regulation.

Overall Audit Strategy and Audit Plan (Ref: Para. 16)

A22.         The group engagement partner's review of the overall group audit strategy and group audit plan is an important part of fulfilling the group engagement partner's responsibility for the direction of the group audit engagement.

Understanding the Group, Its Components and Their Environments

Matters about Which the Group Engagement Team Obtains an Understanding (Ref: Para. 17)

A23.         ASA 315 contains guidance on matters the auditor may consider when obtaining an understanding of the industry, regulatory, and other external factors that affect the entity, including the applicable financial reporting framework; the nature of the entity; objectives and strategies and related business risks; and measurement and review of the entity's financial performance.[17]  Appendix 2 of this Auditing Standard contains guidance on matters specific to a group, including the consolidation process.