Riding a crocodile - ISA600
By Helmut Havenith, Audit Central SARL
Part II of a two-part series
The respect of ISA600 on group audits has become a focus of the regulators of the profession. Having discussed last time on consolidated financial statements hereafter a few more lines on the standard.
ISA600 requires the group auditor to plan the group audit and to instruct component auditors on materiality, scope, risks and, where required, an audit plan.
Useful guidance on the determination of component materiality in quantitative and qualitative terms was provided by articles in the Journal of Accountancy.
Audit scope, usually audit procedures or limited reviews, result from the significance of the component.
The key risk is fraud, in its broadest definition. Much more opportunity for fraud, in its broadest definition, arises when multiple countries involved. Weaknesses in client’s control system might significantly add up on this risk.
The group auditor is as well required to ensure the proper performance of the group audit. When confronted to component auditors of a dozen or more firms, from big4 to small, on-field reviews are mandatory to dispatch professional duties under ISA600. Worth to mention in client discussions, that the big integrated firms, claiming global methodology everywhere, meanwhile review their own network.
Some regulators’ requirement to have all working papers relating to the group audit available during a professional review needs to be anticipated when sending out instructions.
In proposals our strong relationship and interactions warrant for GGI in group audits. As an association however, we cannot produce global proposals. Accommodate time for trust building before clients consider changing auditors.
The ride on a crocodile was rather a sit on a crocodile but with a factual shake hand. The calm attitude of the crocodile guide applies to consolidation audits and ISA 600. Watching rear mirrors to see what the other beasts are doing applies to such audits as well.
Helmut HavenithAudit Central SARL, Bertrange, Luxembourg
T: +352 661 111 263
Luxembourg- based Audit Central SARL focuses on independent audit, assurance, internal audit and related services. For 10 years, the firm has demonstrated steady growth in response to a continually expanding and diversifying client base. As Luxembourg is well positioned for group head offices, Audit Central quite frequently acts as group auditor.
After 20 years with Big Four companies, Helmut Havenith set up his own audit company in the multi-cultural and multi-lingual Luxembourg some 10 years ago. With the help of his team, he is dedicated to the audit of groups, private equity, securitisation companies and other commercial and industrial companies.
Published: March 2019 l Photo: Uwe Rieder