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

Norvik Group's engagement team plans to use Dalton & Co, an audit firm outside its network, as a component auditor for a overseas subsidiary. Under ISA 600 (Revised), which step is required before the group team decides to use Dalton's work?

The group team must understand whether the component auditor understands and will comply with relevant ethical requirements, including independence, and assess its competence and capability. ISA 600 (Revised) requires this before using the component auditor's work, whereas common professional body membership or liability transfers are not requirements.

  1. AObtain an understanding of whether Dalton understands and will comply with relevant ethical requirements, including independence, and of its competence and capabilityCorrect
  2. BConfirm that Dalton is a member of the same professional accounting body as the group team
  3. CObtain Dalton's written agreement to accept the group engagement partner's liability
  4. DReplace Dalton's materiality with the group's overall materiality

Explanation

ISA 600 (Revised) requires the group team to understand the component auditor, including ethical compliance and independence, professional competence, and the extent of involvement possible, and the oversight environment. Shared professional body membership is not required. Component performance materiality is set by the group team, not equal to overall group materiality, and liability is not transferred.

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