Enumerate the responsibilities of group engagement partner and group engagement team.
Responsibilities of group engagement partner and group engagement team include:
1. CARRY OUT ACCEPTANCE AND CONTINUANCE
(a) . Perform acceptance and continuance procedures in order to ascertain whether the group engagement team will be able to carry out additional procedures on the financial information the component.
(b) In case the scope limitation is so pervasive that a disclaimer would be required, the engagement should not be accepted.
(c) Obtain engagement letter for the audit of group financial
2. ESTABLISH OVERALL AUDIT STRATEGY AND AC
3. OBTAIN UNDERSTANDING OF THE GROUP
COMPONENTS AND THEIR ENVIRONMENT.
(a) Obtain an understanding of the group, its components and their environment.
(b) Obtain understanding of the consolidation process.
(i) Review instructions issued by management to components.
(ii) The component auditor or group engagement group team should carry out tests of controls group wide.
(iii) Verify that all components have been included in group financial statements.
(iv) Evaluate completeness and accuracy of consolidation adjustments.
(v) If the component’s accounting policies are different from group’s policies, verify that appropriate adjustments have been made for the
purposes of group financial statements.
(vi) If the component’s accounting period is different rom group’s accounting period, verify that appropriate adjustments have been made for the purposes of group financial statements.
4 OBTAIN UNDERSTANDING OF COMPONENT AUDITOR
(a) Compliance of ethical requirements, particularly independence.
(b) Professional competence
(c) Regulatory environment governing the auditors
(d) In case the group engagement partner has concern over the above issues, the group engagement team should perform the audit of the components.
5 DETERMINE MATERIALITY LEVEL
(a) Materiality for component
(b) Materiality for group
5 RESPONDING TO ASSESSED RISKS
(a) For components that are financially significant, arrange full scope audit (Financially significant components are those components which comprises more that 15% of sales, net income, assets, liabilities or cash flows 0 f the group).
(b) For components that are significant not because of financial benchmark but because of excessive risks, either arrange full scope audit or audit of specific accounts or carry out specified procedures.(c) For insignificant components carry out analytical procedures.
(d) Involve group engagement team in the work performed by component auditor, in the following areas:
(i) Discuss business activities that are significant to the group.(ii)Areas where financial statements of the component may be misstated due to existences of frauds and errors.
(iii)Review component auditor’s documentation of identified significant risks of material misstatements.
(iv) When significant risks of material misstatements of the group financial statements have been identified in a components, the group engagement team shall evaluate what further audit procedures are required and whether involvement of group engagement team “is necessary”.
7 ARRANGE SUBSEQUENT EVENTS REVIEW
Consider that subsequent events review of components has been performed upto the date of auditor’s report on group’s financial
8. CONSIDER SIGNIFICANT FINDINGS OF THE
9. COMMUNICATION WITH COMPONENT AUDITOR
Following matters need be communicated with the component auditor:
(a) Work to be performed
(b) The use to be made of the work
(c) Form and contents of component auditor’s communication with group engagement team.
(d) Confirmation that the component auditor will coop with group engagement team.
(e) Ethical requirements, particularly independence requirements regarding both the group and the component.
(f) Component materiality
(g) Identified significant risks of a material misstatement of the group financial statement, whether due to fraud or error.
(h) Related parties
(i) Non compliance of law and regulations
(j) Uncorrected misstatements of the financial statements
(k) Material weaknesses in internal controls
(l) Relevant accounting, auditing and reporting requirements.
(m) Audit opinion:
(i) Evaluating sufficiency and appropriateness of audit evidence obtained
(ii) The group engagement team shall evaluate whether the component auditor has obtained sufficient and appropriate audit evidences.
10 COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE
The group engagement team shall communicate following matters to those charged with governance:
(a) Material weaknesses in the group wide controls
(b) Summary of the work performed on the financial statements of the components
(c) Concerns ‘on the evaluation of the work of component auditor
(d) Any limitations on scope
(e) Frauds or suspected frauds
What matters should be documents regarding group audit?
Significant matters to be documented include:
(a) Work performed on the financial information of component.
(b) Group engagement team involvement in the work performed by the component auditor.
(c) Communications between group engagement team and the component auditor.
Discuss reporting considerations in the context of group accounts.
1. If the group auditor is satisfied that the work of component auditor is adequate for the purpose of group audit, no reference to the work of component auditors is made in the group auditor’s report.
2. The group auditor has the sole responsibility for the audit opinion and a reference to the components auditor in the group auditor’s report may be misunderstood and interpreted as a qualification of opinion or a devise of responsibility neither of which is appropriate.
3. When the group auditor concludes that adequate evidence about the work of component cannot be obtained and sufficient additional procedures cannot be applied by the group auditor with respect to financial statements of the component, the group auditor should consider implications for the opinion.
4. Any report of the component auditor containing a qualified opinion or an explanatory paragraph referring to a fundamental uncertainty requires group auditor to consider whether the subject of qualification or the fundamental uncertainty is of such a nature and significance, in relation to financial statements of
the group, that it needs to be reflected in the audit opinion of the group auditor.