Document ID: chunk:federal_register_of_legislation:F2025C00096:body:0:p19
Version: federal_register_of_legislation:F2025C00096
Segment Type: other
Provision Reference: 
Character Range: 54919–57849

or processes that are applicable to more than one entity or business unit within the group, for example through the use of a shared service centre.  When such centralised activities are relevant to the group's financial reporting process, the group auditor may determine that the shared service centre is a component.

 4.              Another consideration that may be relevant to the group auditor's determination of components is how management has determined operating segments in accordance with the disclosure requirements of the applicable financial reporting framework.[36]

Involvement of Component Auditors (Ref: Para. 7–8)

 1.          Component auditors may perform an audit of the financial report of a component, whether for statutory, regulatory or other reasons, particularly when a component is a legal entity.  When a component auditor is also performing or has completed an audit of the component financial report, the group auditor may be able to use audit work performed on the component financial report, provided the group auditor is satisfied that such work is appropriate for purposes of the group audit.  In addition, component auditors may adapt the work performed on the audit of the component financial report to also meet the needs of the group auditor.  In any event, the requirements of this ASA apply, including those relating to the direction and supervision of component auditors and the review of their work.

 2.          In accordance with ASA 220,[37] the engagement partner is required to determine that the approach to direction, supervision and review is responsive to the nature and circumstances of the audit engagement.  Paragraph A76 provides examples of different ways in which the group engagement partner may take responsibility for directing and supervising component auditors and reviewing their work, and may be helpful in circumstances when the group auditor plans to use the audit work from an audit of a component financial report that has already been completed.

 3.          As explained in ASA 200,[38] detection risk relates to the nature, timing and extent of the auditor's procedures that are determined by the auditor to reduce audit risk to an acceptably low level.  Detection risk is a function not only of the effectiveness of an audit procedure but also the application of that procedure by the auditor.  Therefore, detection risk is influenced by matters such as adequate planning, the assignment of appropriate resources to the engagement, the exercise of professional scepticism, and the supervision and review of the audit work performed.

 4.          Detection risk is a broader concept than aggregation risk as described in paragraphs 14(a) and A19.  In a group audit, there may be a higher probability that the aggregate of uncorrected and undetected misstatements may exceed materiality for the group financial report as a whole because audit procedures