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

Orion plc's group auditor intends to involve a component auditor from a firm outside its network for a subsidiary in a country where the auditor's competence is unknown. Which action is most appropriate before relying on that component auditor's work?

The group auditor should obtain an understanding of the component auditor's competence, capability, independence and compliance with relevant ethical requirements, plus the regulatory environment, before relying on the work. Local registration or ownership structure alone is insufficient, and evaluation cannot wait until completion.

  1. AObtain an understanding of the component auditor's professional competence, independence and the environment in which they operate, including relevant ethical requirementsCorrect
  2. BRely on the component auditor's local registration as sufficient evidence of competence
  3. CAssume independence because the component is a wholly owned subsidiary
  4. DDefer all evaluation until the component auditor has finished and reported

Explanation

ISA 600 (Revised) requires the group auditor to understand whether the component auditor understands and will comply with relevant ethical requirements, including independence, and has the necessary competence and capability. This must be done at the acceptance and planning stage, not afterwards. Registration alone is not enough, and wholly owned status does not establish independence.

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