2311 Introduction—Group audit considerations

Dec-2023

OAG Guidance

This section contains requirements and guidance applicable to group audit engagements. Group audit requirements and guidance applies to audits of consolidated financial statements, regardless of whether the audit engagement is structured so that audit procedures are performed at multiple locations or are performed centrally by one audit  engagement team.

Group audits, whether of small groups with only two or three components, or of major corporations operating on a global scale, often involve complex considerations regarding audit strategy, planning, execution and communication. Effective and efficient audits are most likely to result when the group engagement team:

• has an understanding of the group entity, its environment and the risks of material misstatement of the group financial statements;

• develops an audit approach that is responsive to the risks in the entity’s business as a whole; and

• determines appropriate levels of direction and supervision of those performing the work and applying judgment in determining which work of component auditors they will review.

Section 2300 does not address joint audits.

OAG Guidance

The following additional terms are used throughout section 2300 in relation to group engagements.  These terms either provide clarification of the CAS 600.9 terms or are additional terms utilized in OAG guidance.

Component—A component could be a head office, parent, division, location, business unit, branch, subsidiary, activity, shared service center, joint venture, associated company, agency, department, Crown corporation, fund, non-governmental organizations, or other entity whose financial information is included in the group financial statements. See additional considerations in OAG Audit 2323 and OAG Audit 2334.

Component auditor—A component auditor can be from an OAG office, OAG audit team, or an external firm/auditor. The component auditor performs audit work related to a component for purposes of the group audit. The component auditor is part of the overall engagement team for a group audit. Also referred to by OAG as component engagement team.

Component engagement leader—The person who is responsible for the audit work performed by the component engagement team, compliance with CAS 220, and signing the interoffice (or interfirm) component auditor's report on behalf of their firm.

Component financial statements—A complete set of stand-alone financial statements, including explanatory notes, of a component. They would ordinarily have been prepared in accordance with the financial reporting framework that is applicable to the component.

Component materiality—Generally, component materiality will be referred to more specifically as “component overall materiality” or “component performance materiality,” which are the materiality levels for a component determined in the context of the group audit.

External firm/auditors—An unaffiliated firm/auditor responsible for the audit work at a component.  Also referred to as a “non-OAG firm” in this guidance.

Group engagement partner—Referred to in OAG as Group engagement leader. In some territories may be a director or senior manager. The group engagement leader is the 'engagement partner' as described by CAS 220.C12(a) for the purpose of the external auditor's report, and, therefore, takes overall responsibility for managing and achieving quality on the group audit engagement through direction and supervision of the group engagement team and component auditors, and through review of their work.

Group auditor or Group engagement team—The group engagement leader and members of the engagement team other than the component auditors. The group engagement team is responsible for:

• establishing the overall group audit strategy and group audit plan.

• directing and supervising component auditors and reviewing their work.

• evaluating the conclusions drawn from the audit evidence obtained as the basis for forming an opinion on the group financial statements.

• Also referred to as a “group auditor” in this guidance.

Group financial statements—Also see definition for “Special purpose financial information prepared for the purposes of group consolidation.”

Group overall materiality and group performance materiality—The overall and performance materiality levels determined for the group financial statements as a whole.

Group-wide controls—Also known  in this guidance as entity level controls related to more than one component in an audit of group financial statements.

Head office—The entity’s central or controlling office in a group audit engagement (typically the parent company).

Interoffice report—A report provided by an OAG component auditor to the OAG group engagement team in relation to a component’s financial statements or component financial information.

Non-significant component—Any component that is not individually financially significant to the group and does not contain a significant risk of material misstatement.

Significant component—see OAG Audit 2323.

Special purpose financial information prepared for the purposes of group consolidation (hereinafter referred to as component financial information or special purpose financial information)—Special purpose financial information prepared for the purposes of group consolidation refers to any form of financial information submitted from a component to the corporate head office to support the preparation of consolidated group financial statements. Such financial information includes, for example:

• Standard reporting forms;

• A trial balance;

• An individual financial statement or statements (i.e., balance sheet, income statement, cash flow statement);

• Financial statement element schedule (e.g., accounts receivable statement); and/or

• Any other financial information (e.g., lease or debt information relevant to the preparation of the notes to the consolidated group financial statements).

Statutory Audit—Includes all audit engagements accepted by the Auditor General such as statutory, regulatory, and other audits.