Before accepting a group audit
What the group engagement partner must be satisfied about under ISA 600 (Revised) before accepting or continuing a group audit, and when to decline.
By Achekam · · 4 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
A holding company asks your firm to audit its consolidated statements. The parent is in Johannesburg, a trading subsidiary is in Lagos, a distribution company is in Nairobi, and each has its own local auditor. The fee is attractive and the client is keen. Before anyone signs an engagement letter, the partner has to answer a harder question than "can we fit it in?": can the firm actually get enough evidence to sign an opinion on the group?
ISA 600 (Revised), Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors), deals with the special considerations of a group audit, including when other auditors work on components. The IAASB says the revision brings the standard into line with ISQM 1, ISA 220 (Revised) and ISA 315 (Revised 2019). That alignment matters at acceptance: quality management starts with deciding which engagements to take on.
The central test: evidence on the consolidation and the components
ACCA explains that, before accepting or continuing a group audit, the group engagement partner must determine whether sufficient appropriate evidence can reasonably be expected to be obtained on the consolidation process and on the financial information of the group's components, to form the group audit opinion.
Two things are being judged here, and both can fail.
The consolidation. Who prepares it, on what system, from which inputs? A consolidation built in a spreadsheet by one person in the parent's finance team, with no review, is a different proposition from one prepared under documented group procedures. Ask to see last year's consolidation pack and adjustments before quoting.
The components. For each component that matters to the group, how will the group team get evidence? Through its own work, through a component auditor, or both? Where a subsidiary is in another country, under a different reporting timetable, the practical answer may be harder than it looks on the organogram.
Component auditors: cooperation, ethics and competence
Where component auditors are involved, ACCA explains that the group engagement partner should consider confirming three things:
- Cooperation. Will the component auditor accept the group team's instructions, report on time in the format required and give access to its working papers if asked?
- Ethics. Is the component auditor aware of, and will it comply with, the ethical requirements that apply to the group audit engagement, including independence?
- Competence and capabilities. Does the firm have the skills, the industry knowledge and the people to do the work to the group's standard?
Ask before accepting, not after. A component auditor who will not commit to the group timetable or will not allow file reviews is an acceptance issue, not a fieldwork problem. Our article on confirmations and component auditors covers the working relationship once the engagement is under way.
Access to information and people
Evidence depends on access. At acceptance, test the group's willingness as well as its structure:
- Will group management give unrestricted access to component management, records and auditors?
- Are there components where local law, a minority shareholder or a joint venture partner limits what the group can share?
- Will the group provide the consolidation workings, not just the final numbers?
- Is there a component the client would rather you did not look at closely, and if so, why?
A restriction imposed by group management on a significant component goes to the heart of the central test. If it cannot be lifted, the evidence cannot reasonably be expected.
Client groups and acceptance records in Achekam
Achekam lets staff see clients grouped under their parent group, with each group's entities and engagement counts, and create a group and add entities to it. Setting the group up first gives the acceptance discussion a clear map of which entities are in scope.
The acceptance itself is recorded as a client acceptance review, made after a conflict check against the firm's own clients and contacts, and only a signed-in partner can approve it. Know the limits: customer due diligence in that review is a tick-box confirmation by the preparer, and Achekam runs no automatic FICA, CIPC or sanctions check. Those checks, for the parent and for any component that is itself a client, remain the firm's own work.
Setting up components before planning
Once accepted, the Group Audit Control Tower records each component with its scope, materiality and component auditor, and lets the group team issue instructions. Each component auditor works through a portal link to acknowledge the instructions, upload deliverables and report misstatements. The token in that link is the only credential, so treat it like a key: send it to the named contact at the component firm, not to a general mailbox.
Recording components at this stage is not a substitute for scoping. It gives scoping somewhere to live. Our guide to group audit scoping covers deciding which components need what work.
When to decline
Decline, or for an existing client consider whether to continue, when the honest answer to the central test is no. Typical reasons:
- group management restricts access to a significant component and will not lift it;
- a component auditor will not cooperate with instructions or file reviews, and the group team cannot do the work itself;
- the consolidation process is so weak that the team cannot reasonably expect to audit it;
- the timetable leaves no realistic time to review component work before the report date.
Record the reasoning either way. A partner who accepted a difficult group should be able to show why the evidence was expected to be available. The IAASB's page on ISA 600 (Revised) gives access to the standard and its supporting material, and is the place to confirm the exact requirements before your next acceptance decision.
Before replying to the next group enquiry, send the client a short list of questions on access, consolidation and component auditors. The answers will tell you most of what the acceptance decision needs.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
