ACCA Strategic Professional · Advanced Audit and Assurance (International)

Group Audits for ACCA AAA: Chapter Guide

A group audit is an audit of consolidated financial statements. The group engagement partner is responsible for the opinion. You assess risks across the group, set component materiality, decide scope, direct and review component auditors, and audit the consolidation. In the exam, you apply each step to the scenario given.

What this chapter covers

This chapter covers how an auditor plans and performs an audit of group financial statements under ISA 600 (Revised). You start with the framework and the group engagement partner's overall responsibility. You then move through acceptance, understanding the group and its components, materiality and scoping, working with component auditors, the consolidation process, and special issues such as overseas components and reporting. Joint audit is a separate arrangement outside ISA 600 (Revised) and is not a group audit, so do not confuse the two.

The chapter sits on top of the rest of AAA. Risk assessment, materiality, evidence, quality management, ethics and reporting all apply again, but at group level. If you are weak on single-entity audit planning, group audits will feel harder than they are. Treat this chapter as a test of whether you can apply basic audit logic to a larger and more complex structure.

It also links to SBR. Consolidation adjustments, such as fair value adjustments, goodwill, intragroup trading and foreign currency translation, create audit risks. Knowing the accounting helps you spot the audit issue in a scenario. AAA is a written exam, so you must apply points to the facts and show professional skills, not list textbook procedures.

Group audit topics can appear in either Section A, the 50-mark case study, or Section B. Scenarios naturally include several components, an overseas subsidiary, a new acquisition or a component auditor you know little about, so there is plenty to apply. Marks come from linking each point to the facts, such as a component in a high-risk country or a poorly resourced local firm. Professional skills marks reward clear, scepticial and commercially sensible advice. A student who can structure a group answer calmly gains an advantage over one who recites ISA headings.

Group audits: topics in the order to study them

1Group Audit Framework and ISA 600 (Revised)Start here to learn the key terms and the group engagement partner's responsibility, which everything else builds on.
2Acceptance and Understanding the Group and Its ComponentsNext comes the first practical step: deciding whether to accept and gaining the understanding that drives risk assessment.
3Component Materiality and Scoping of ComponentsOnce you understand the group, you set materiality and decide which components need what level of work.
4Using Component Auditors and Group Auditor InvolvementScoping leads straight to who does the work, and how the group team directs, communicates with and reviews it.
5Consolidation Process and Group Audit EvidenceWith component work planned, you turn to auditing the consolidation adjustments and evaluating the evidence gathered.
6Group Audit Issues: Joint Auditors, Overseas Components and ReportingFinish with special situations and reporting, which need the whole framework already in place.

How to prepare Group audits

Group audits are about applying a logical sequence to a scenario. Build the sequence first, then practise using it on written questions.

Read the framework topic and write a one-page flow from acceptance to reporting. Learn it as a sequence you can reuse as a mental checklist.
Refresh the SBR consolidation basics on goodwill, intragroup items, fair value adjustments and foreign currency. This helps you see audit risks in scenarios.
For each topic, write short points in the form: ISA requirement, why it matters, what it means for a scenario component.
Practise scoping with made-up groups. Start from the risks of material misstatement of the group statements. Decide which components need work and whether that is an audit of the component's financial information, an audit of specific balances or transactions, or specified procedures. Justify each choice in a sentence.
Practise component auditor questions. Cover competence, independence, communication, review of working papers and what to do if the work is inadequate.
Answer full past-style case study questions under time. Plan first, use headings from the requirement, and end with a clear recommendation.
Review your answers for professional skills. Check that you were sceptical, concise and practical, not just technically correct.

Common mistakes in Group audits

Listing ISA 600 steps without applying them to the scenario.
Fix: Start each point with a scenario fact, such as the component's size, country or auditor, then explain the audit consequence.
Saying the component auditor takes responsibility for the group opinion.
Fix: State that the group engagement partner remains responsible and must be sufficiently involved in the work.
Treating component materiality as a simple share of group materiality.
Fix: Explain that component materiality is set lower than group materiality, using judgement, to reduce aggregation risk to an acceptably low level. Also mention that component performance materiality is set.
Ignoring the consolidation process as an audit area.
Fix: Always consider intragroup items, fair value adjustments, goodwill, accounting policy alignment and translation.
Accepting a component auditor's work without challenge.
Fix: Show scepticism: assess competence and independence, communicate instructions, and review their work and conclusions.
Ending with generic points and no recommendation or professional skills.
Fix: Plan your time, use clear headings, be concise and give a practical, justified conclusion.

Last-day revision: Group audits

The group engagement partner is responsible for the group audit opinion, even when component auditors do work.
Accepting a group audit needs a view on whether sufficient appropriate evidence can be obtained, including access to components and management.
Understand the group's structure, controls, consolidation process and any group-wide risks before setting the plan.
Group materiality is set for the consolidated statements. Component materiality is set lower, using judgement, to reduce aggregation risk to an acceptably low level. Component performance materiality is also set.
Scoping under ISA 600 (Revised) is risk-based: assess the risks of material misstatement of the group statements, then design and perform further audit procedures responsive to those risks. These may include work on a component's financial information, specific balances or transactions, or specified procedures. Group-level analytical procedures can supplement this work.
Evaluate a component auditor's competence, independence, professional standards and resources before relying on them.
Communicate clearly with component auditors and review their work in line with the risk involved.
Audit consolidation adjustments: intragroup eliminations, fair value, goodwill, uniform accounting policies and translation.
Overseas components raise issues of local law, language, different frameworks, currency and access to records.
If you cannot obtain sufficient evidence on a component, consider the effect on the opinion, which could be modified.
Joint audit is a separate arrangement outside ISA 600 (Revised) and is not a group audit. The responsibilities of joint auditors depend on local law and the engagement terms. Agree the split of work and the extent of joint responsibility, and communicate openly. Joint auditors are distinct from component auditors.
Always tie each point to the scenario, then give a clear recommendation.

Group audits practice questions

Group audits in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Group audits: frequently asked questions

Is ISA 600 (Revised) important for AAA?

Yes. It is the main standard behind this chapter and underpins most group audit questions. Learn its logic and apply it to the scenario, not just its wording.

Do I need to know consolidation accounting for group audits?

You need the basics, not full consolidation calculations. Knowing how goodwill, fair value adjustments, intragroup items and translation arise helps you identify the audit risks.

How are group audit questions usually set?

They usually appear inside a scenario with several components, perhaps an overseas subsidiary or a new acquisition. You are asked to explain risks, scoping or how to deal with component auditors, and to give advice.

What should I do if a component auditor's work is inadequate?

Discuss the concerns with them and consider asking for more work or performing additional procedures yourself. If sufficient evidence still cannot be obtained, consider the effect on the group audit opinion.