ACCA Strategic Professional · Advanced Audit and Assurance (International) · Group audits

During acceptance of Brightwater Group, the engagement team learns that management of a significant overseas subsidiary, Norvik Ltd, is restricted by local law from allowing the group team or component auditor to access certain records. The group engagement partner concludes the restriction is likely to result in a limitation on scope of the group audit that cannot be overcome. What is the most appropriate response under ISA 600 (Revised) at the acceptance stage?

The firm should not accept the engagement if an uncircumventable restriction at a significant component is likely to lead to a disclaimer of opinion, unless law requires acceptance. Deferring the issue, excluding the subsidiary or relying on representations would not provide sufficient appropriate evidence.

1. AAccept the engagement and issue a modified opinion only if the limitation is found material at year end
2. BAccept the engagement but exclude Norvik Ltd from the group financial statements
3. CNot accept the engagement as group auditor if it is expected that the limitation will lead to a disclaimer of opinion, unless required by law to acceptCorrect
4. DAccept and rely on the parent's management representation about Norvik Ltd instead of audit evidence