CA Final · Advanced Auditing, Assurance and Professional Ethics · Group Audits
CA Mehul audits the parent and components representing most of the group's financial information, and knows their business well. One component, audited by another auditor, carries a high risk of material misstatement. Which approach is consistent with SA 600 when deciding to act as principal auditor?
He should weigh the risk of material misstatement in the other auditor's component and consider performing additional procedures on it that give him significant participation. High materiality of his own portion does not by itself override the risk, and the risk is not an automatic disqualification.
- ATreat the high materiality of his own portion as conclusive and disregard the risk in the other component
- BConsider the risk of material misstatement in the other auditor's component and whether additional procedures regarding that component would give him significant participation in that auditCorrect
- CRefuse to act as principal auditor because any high-risk component audited by another auditor disqualifies him
- DRely only on his knowledge of the business of the components he audits himself, since the others are not his concern
Explanation
The Standard lists materiality of own portion, knowledge of the components' business, risk in components audited by the other auditor, and additional procedures as considerations. Strong materiality does not remove the need to weigh the risk. High risk is also not an automatic disqualifier, because additional procedures can give significant participation.
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