Document ID: chunk:federal_register_of_legislation:F2023C00341:reg:4:p36
Version: federal_register_of_legislation:F2023C00341
Segment Type: reg
Provision Reference: reg 4 (pt 36/42)
Character Range: 110526–114018

the objectivity of internal auditors, the level of competence of the internal audit function, and whether the function applies a systematic and disciplined approach where the group engagement team expects to use the function's work.

Consolidation Process

3.                   The group engagement team's understanding of the consolidation process may include matters such as the following:

Matters relating to the applicable financial reporting framework:

           * The extent to which component management has an understanding of the applicable financial reporting framework.

           * The process for identifying and accounting for components in accordance with the applicable financial reporting framework.

           * The process for identifying reportable segments for segment reporting in accordance with the applicable financial reporting framework.

           * The process for identifying related party relationships and related party transactions for reporting in accordance with the applicable financial reporting framework.

           * The accounting policies applied to the group financial report, changes from those of the previous financial year, and changes resulting from new or revised standards under the applicable financial reporting framework.

           * The procedures for dealing with components with financial year‑ends different from the group's year‑end.

Matters relating to the consolidation process:

           * Group management's process for obtaining an understanding of the accounting policies used by components, and, where applicable, ensuring that uniform accounting policies are used to prepare the financial information of the components for the group financial report, and that differences in accounting policies are identified, and adjusted where required in terms of the applicable financial reporting framework.  Uniform accounting policies are the specific principles, bases, conventions, rules, and practices adopted by the group, based on the applicable financial reporting framework, that the components use to report similar transactions consistently.  These policies are ordinarily described in the financial reporting procedures manual and reporting package issued by group management.

           * Group management's process for ensuring complete, accurate and timely financial reporting by the components for the consolidation.

           * The process for translating the financial information of foreign components into the currency of the group financial report.

           * How IT is organised for the consolidation, including the manual and automated stages of the process, and the manual and programmed controls in place at various stages of the consolidation process.

           * Group management's process for obtaining information on subsequent events.

Matters relating to consolidation adjustments:

           * The process for recording consolidation adjustments, including the preparation, authorisation and processing of related journal entries, and the experience of personnel responsible for the consolidation.

           * The consolidation adjustments required by the applicable financial reporting framework.

           * Business rationale for the events and transactions that gave rise to the consolidation adjustments.

           * Frequency, nature and size of transactions between components.

           * Procedures for monitoring, controlling, reconciling and eliminating intra‑group