IFAC SMP Advisory Group Response to the IAASB's Exposure Draft on Proposed ISA 600 (Revised)
Oct 19, 2020 | Comment Letters
The SMP Advisory Group has issued a response to the IAASB's Proposed International Standard on Auditing 600 (Revised): Special Considerations -- Audits of Group Financial Statements (Including the Work of Component Auditors).
The SMP Advisory Group generally supports a risk-based approach to planning and performing the audit of the group financial statements. However, we have received concerns that some of the proposals may reduce the quality of group audits in some cases, cause disruption to audit markets and potentially have unintended consequences which disadvantage SMPs.
Some practitioners have considered that removing the requirement for an audit for significant components and allowing the Group Engagement Team to elect to perform all risk identification, assessment and responsive procedures -- without recourse to component auditors -- could be detrimental to audit quality of the group financial statements in some situations. It is their views that the risk identification and assessment procedures for particular classes of transactions, account balances, or disclosures may not be sufficiently effective at the GET level (i.e., without recourse to component auditors’ potentially more extensive knowledge of components), which would in turn impact the design and performance of risk response procedures -- thus increasing the risk that material misstatements (in particular, those resulting from fraud, non-compliance with laws and regulations, and going concern issues at component level) of the group financial statements not being detected.
Suitable requirements need to be set to ensure that GET draw on the sufficient knowledge of significant components (usually via component auditor’s involvement) when appropriate. The SMP Advisory Group does, of course, appreciate that using a risk-based approach when planning and performing a group audit does not preclude an assessment of significant components and involvement of component auditors, and that this may not be necessary in some group audits. However, the standard would benefit from a requirement to ensure that this is the case where it continues to be appropriate, rather than be silent thereon.
Copyright © 2020 The International Federation of Accountants (IFAC). All rights reserved.
You must be signed in to the IFAC website in order to submit a comment. If you do not have an account, please register below. IFAC respects your privacy and will not send you unsolicited email or spam. You can subscribe to IFAC publications, change your subscription preferences, or manage your user profile at any time.