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

Orion Group's auditor has set group materiality at $1,500,000 and clearly trivial at $75,000. Component Delta contributes 3% of group revenue and has no significant risks or unusual items. Component Delta is not individually financially significant. Which approach to scoping Delta is most consistent with ISA 600 (Revised)?

For a small component with no significant risks, the group team may rely on group-level analytical procedures and consider whether more work is needed if these are not sufficient. There is no fixed percentage exemption, and not every component needs an audit or a separate opinion.

  1. ADelta can be ignored entirely because it is below 5% of revenue, with no procedures at the group level
  2. BAn audit of Delta's complete financial information is always required for every component
  3. CDelta's auditor must issue an opinion on Delta's financial statements for the group opinion to be valid
  4. DThe group team may perform analytical procedures at group level for Delta, and consider further procedures if these do not give sufficient appropriate evidenceCorrect

Explanation

Under ISA 600 (Revised), for components not subject to audit work on financial information, the group team performs analytical procedures at group level, and if these do not give sufficient appropriate evidence, it designs further procedures. There is no rule of exemption below a percentage threshold and no requirement for an audit of every component. A component opinion is not required for the group opinion.

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