ACCA Strategic Professional · Advanced Audit and Assurance (International) · Group audits
Zephyr Group has a component in Brazil that is financially significant to the group. The component auditor has been instructed to audit the component's financial information using a component materiality set by the group team. Which statement about the group auditor's communication with the component auditor is correct?
The group auditor must clearly and promptly communicate requirements to the component auditor, including the work to perform, how it will be used, ethical requirements, component performance materiality and the reporting threshold for misstatements. This applies even to network firms and is not limited to cases where errors arise.
- ARequirements should be communicated clearly, including the work to be performed, the use of that work, component materiality and the threshold for clearly trivial misstatementsCorrect
- BCommunication is needed only if the component auditor finds a misstatement
- CComponent materiality is set by the component auditor independently and need not be communicated to the group team
- DInstructions are optional where the component auditor is a network firm
Explanation
ISA 600 (Revised) requires the group auditor to communicate its requirements on a timely basis, including the work to be performed, use of the work, relevant ethical requirements, component performance materiality and the misstatement reporting threshold. Option B is wrong as communication is a two-way, ongoing process. Network membership does not remove the requirement.
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