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

Lumen Group's auditor concludes that the component auditor for a significant subsidiary has not complied with the group's independence requirements, and no safeguards can fix this. The group team cannot perform the work itself or use another auditor in time. What is the most appropriate consequence for the group audit?

The group auditor must assess the effect on the group opinion. If it cannot obtain sufficient appropriate evidence through other means, there is a scope limitation and the opinion must be modified, either qualified or disclaimed depending on pervasiveness. An Emphasis of Matter paragraph cannot cure the lack of evidence.

  1. AConsider the effect on the group opinion; if sufficient appropriate audit evidence cannot be obtained, modify the opinion because of the scope limitationCorrect
  2. BAccept the work, since independence breaches at component level do not affect the group opinion
  3. CRefer to the component auditor's breach in an Emphasis of Matter paragraph and issue an unmodified opinion
  4. DWithdraw from the engagement automatically with no further consideration

Explanation

If the component auditor is not independent and the group team cannot obtain sufficient appropriate evidence by other means, there is a limitation on scope. The group auditor must consider modifying the opinion (qualified or disclaimer depending on materiality and pervasiveness). An Emphasis of Matter cannot substitute for evidence, and withdrawal is not automatic.

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