Document ID: chunk:federal_register_of_legislation:F2023C00341:reg:4:p23
Version: federal_register_of_legislation:F2023C00341
Segment Type: reg
Provision Reference: reg 4 (pt 23/42)
Character Range: 73895–77160

component auditor or information provided by the independent oversight bodies.

Ethical Requirements that Are Relevant to the Group Audit (Ref: Para. 19(a))

A37.         When performing work on the financial information of a component for a group audit, the component auditor is subject to ethical requirements that are relevant to the group audit.  Such requirements may be different or in addition to those applying to the component auditor when performing a statutory audit in the component auditor's jurisdiction.  The group engagement team therefore obtains an understanding whether the component auditor understands and will comply with the ethical requirements that are relevant to the group audit, sufficient to fulfil the component auditor's responsibilities in the group audit.

The Component Auditor's Professional Competence (Ref: Para. 19(b))

A38.         The group engagement team's understanding of the component auditor's professional competence may include whether the component auditor:

           * Possesses an understanding of auditing and other standards applicable to the group audit that is sufficient to fulfill the component auditor's responsibilities in the group audit;

           * Possesses the special skills (for example, industry specific knowledge) necessary to perform the work on the financial information of the particular component; and

           * Where relevant, possesses an understanding of the applicable financial reporting framework that is sufficient to fulfill the component auditor's responsibilities in the group audit (instructions issued by group management to components often describe the characteristics of the applicable financial reporting framework).

Application of the Group Engagement Team's Understanding of a Component Auditor (Ref: Para. 20)

A39.         The group engagement team cannot overcome the fact that a component auditor is not independent by being involved in the work of the component auditor or by performing additional risk assessment or further audit procedures on the financial information of the component.

A40.         However, the group engagement team may be able to overcome less than serious concerns about the component auditor's professional competency (for example, lack of industry specific knowledge), or the fact that the component auditor does not operate in an environment that actively oversees auditors, by being involved in the work of the component auditor or by performing additional risk assessment or further audit procedures on the financial information of the component.

A41.         Where law or regulation prohibits access to relevant parts of the audit documentation of the component auditor, the group engagement team may request the component auditor to overcome this by preparing a memorandum that covers the relevant information.

Materiality (Ref: Para. 21‑23)

A42.         The auditor is required:[21]

(a)                When establishing the overall audit strategy, to determine:

              (i)                      Materiality for the financial report as a whole; and

              (ii)                    If, in the specific circumstances of the entity, there are particular classes of transactions, account balances or disclosures for