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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Advanced Auditing, Assurance and Professional Ethics

Case: Kaveri Agro Foods Ltd has a wholly owned subsidiary, Kaveri Exports Pvt Ltd, audited by another firm, M/s Iyer & Associates. Kaveri Exports contributes 35% of consolidated revenue and is a significant component. The group engagement partner, Mr Rao, wants to rely on the component auditor's work. Which action is consistent with SA 600 (Revised) principles for a significant component?

The group engagement partner must communicate requirements clearly, be involved in the component auditor's risk assessment and evaluate their work, because responsibility for the group audit opinion stays with the group engagement partner and is not transferred by reliance or by referring to the other auditor.

  1. ARely on the component auditor's report without any communication since the firm is a CA firm
  2. BTake full responsibility only for the parent's standalone audit and ignore the component
  3. CCommunicate requirements, be involved in the component auditor's risk assessment and evaluate the adequacy of their work, while remaining responsible for the group opinionCorrect
  4. DRefer to the component auditor's work in the group audit report to transfer responsibility to them

Explanation

The group engagement partner remains responsible for the group opinion and must direct, supervise and review component auditors, including involvement in risk assessment for significant components. Reference to the component auditor in the report does not reduce this responsibility.

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