Annual Audit Manual

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2329 Sufficient and Appropriate Resources
Dec-2023

In This Section

Sufficient and appropriate resources to perform the engagement

Financial reporting framework or group accounting considerations

Sufficient and appropriate resources to perform the engagement

CAS Requirement

The engagement partner shall determine that sufficient and appropriate resources to perform the engagement are assigned or made available to the engagement team in a timely manner, taking into account the nature and circumstances of the audit engagement, the firm’s policies or procedures, and any changes that may arise during the engagement (CAS 220.25).

The engagement partner shall determine that members of the engagement team, and any auditor’s external experts and internal auditors who provide direct assistance who are not part of the engagement team, collectively have the appropriate competence and capabilities, including sufficient time, to perform the audit engagement (CAS 220.26).

If, as a result of complying with the requirements in paragraphs 25 and 26, the engagement partner determines that resources assigned or made available are insufficient or inappropriate in the circumstances of the audit engagement, the engagement partner shall take appropriate action, including communicating with appropriate individuals about the need to assign or make available additional or alternative resources to the engagement (CAS 220.27).

The engagement partner shall take responsibility for using the resources assigned or made available to the engagement team appropriately, given the nature and circumstances of the audit engagement (CAS 220.28).

CAS Guidance

Sufficient and Appropriate Resources to Perform the Engagement

In determining whether sufficient and appropriate resources to perform the engagement have been assigned or made available to the engagement team, ordinarily the engagement partner may depend on the firm’s related policies or procedures (including resources) as described in paragraph A6. For example, based on information communicated by the firm, the engagement partner may be able to depend on the firm’s technological development, implementation and maintenance programs when using firm‑approved technology to perform audit procedures (CAS 220.A71).

Competence and Capabilities of the Engagement Team

When determining that the engagement team has the appropriate competence and capabilities, the engagement partner may take into consideration such matters as the team’s (CAS 220.A72):

  • Understanding of, and practical experience with, audit engagements of a similar nature and complexity through appropriate training and participation.
  • Understanding of professional standards and applicable legal and regulatory requirements.
  • Expertise in specialized areas of accounting or auditing.
  • Expertise in IT used by the entity or automated tools or techniques that are to be used by the engagement team in planning and performing the audit engagement.
  • Knowledge of relevant industries in which the entity being audited operates.
  • Ability to exercise professional skepticism and professional judgment.
  • Understanding of the firm’s policies or procedures.

Internal auditors and an auditor’s external expert are not members of the engagement team. CAS 610 and CAS 620 include requirements and guidance relating to the assessment of the competence and capabilities of internal auditors and an auditor’s external expert, respectively (CAS 220.A73).

The group engagement team’s understanding of the component auditor’s professional competence may include whether the component auditor (CAS 600.A38):

  • possesses an understanding of auditing and other standards applicable to the group audit that is sufficient to fulfill the component auditor’s responsibilities in the group audit;
  • possesses the special skills (e.g., industry specific knowledge) necessary to perform the work on the financial information of the particular component; and
  • where relevant, possesses an understanding of the applicable financial reporting framework that is sufficient to fulfill the component auditor’s responsibilities in the group audit (instructions issued by group management to components often describe the characteristics of the applicable financial reporting framework).

However, the group engagement team may be able to overcome less than serious concerns about the component auditor’s professional competency (e.g., lack of industry specific knowledge), or the fact that the component auditor does not operate in an environment that actively oversees auditors, by being involved in the work of the component auditor or by performing additional risk assessment or further audit procedures on the financial information of the component (CAS 600.A40).

Insufficient or Inappropriate Resources

The engagement partner’s determination of whether additional engagement level resources are required is a matter of professional judgment and is influenced by the requirements of this CAS and the nature and circumstances of the audit engagement. As described in paragraph A11, in certain circumstances, the engagement partner may determine that the firm’s responses to quality risks are ineffective in the context of the specific engagement, including that certain resources assigned or made available to the engagement team are insufficient. In those circumstances, the engagement partner is required to take appropriate action, including communicating such information to the appropriate individuals in accordance with paragraph 27 and paragraph 39(c). For example, if an audit software program provided by the firm has not incorporated new or revised audit procedures in respect of recently issued industry regulation, timely communication of such information to the firm enables the firm to take steps to update and reissue the software promptly or to provide an alternative resource that enables the engagement team to comply with the new regulation in the performance of the audit engagement (CAS 220.A77).

If the resources assigned or made available are insufficient or inappropriate in the circumstances of the engagement and additional or alternative resources have not been made available, appropriate actions may include (CAS 220.A78):

  • Changing the planned approach to the nature, timing and extent of direction, supervision and review (see also paragraph A94).
  • Discussing an extension to reporting deadlines with management or those charged with governance, when an extension is possible under applicable law or regulation.
  • Following the firm’s policies or procedures for resolving differences of opinion if the engagement partner does not obtain the necessary resources for the audit engagement.
  • Following the firm’s policies or procedures for withdrawing from the audit engagement, when withdrawal is possible under applicable law or regulation.

OAG Guidance

Group auditor responsibilities

The group engagement leader and team, in collaboration with the component engagement leader and team:

  • Identifies the resource needs of the group audit taking into account the nature and circumstances of the engagement; and
  • Assesses whether the members of the group and component engagement teams, and any external experts and internal auditors who provide direct assistance, collectively have the appropriate competence and capabilities, including sufficient time, to perform the work allocated to them.

The group engagement leader’s assessment of the competence and capabilities of the component engagement team influences the nature, timing and extent of the group engagement leader and team’s direction and supervision of the component engagement team and the review of their work.

The group engagement leader exercises professional judgment to determine whether the component engagement team has appropriate competence and capabilities, including sufficient time, to perform the audit work assigned to them. The group engagement leader may consider:

  • Previous work experience, if any, with the component engagement team.
  • The component engagement team’s knowledge and expertise pertaining to the entity’s industry and any specialized areas of accounting or auditing relevant to the entity and engagement.
  • The component engagement team’s understanding of the applicable financial reporting framework used to prepare the financial statements and the relevant GAAS.
  • The degree to which the group engagement team and component engagement team are subject to a common system of quality management (e.g., whether the group and component engagement teams use common methodologies or IT applications; whether the group and component engagement teams are subject to common similar monitoring activities).
  • The degree to which the group engagement team and component engagement team are subject to the same or similar laws and regulations, language and culture, education and training, professional oversight and standards.
  • The ability of the component engagement team to meet deadlines in prior years (i.e., whether the resources assigned in the prior year were sufficient and had sufficient time to meet planned deadlines).

When the component auditor is another OAG audit team, a planning meeting(s) may also be used by the group and component engagement leaders to discuss the engagement resources assigned and made available to the engagement, including for example:

  • the composition of the engagement team, including the use of specialists and/or auditor’s experts, the allocation of supervision/ coaching and review responsibilities, and the overall sufficiency of the assigned resources;
  • the planned and appropriate use of specific technological resources (e.g., planned use of technological solutions and other technological resources); and
  • the appropriate use of intellectual resources (e.g., OAG Audit Manual, OAG Templates).

When the component auditor is an external firm/auditor, the group engagement leader and team’s procedures to determine the component engagement team’s competence and capabilities may include, for example:

  • communicating instructions regarding the competencies and capabilities required of the component engagement team and obtaining a confirmation from the external firm component auditor that they have sufficient and appropriate resources to perform the work requested, including sufficient time;
  • obtaining an understanding of the component engagement firm’s professional standing;
  • requesting the component auditor to confirm their understanding of the relevant ethical requirements, including those related to independence, applicable given the nature and circumstances of the group audit; and
  • obtaining published results of regulator inspections.

Insufficient or Inappropriate Resources

The group engagement leader assesses, through their direction and supervision of the component engagement team and the review of their work throughout the engagement, whether the engagement resources assigned remain sufficient and appropriate.

If the group engagement leader identifies areas where they believe the component engagement team’s resources are insufficient or inappropriate, the group engagement leader takes appropriate action, including:

  • Considering whether to discuss the matter with the component engagement leader and agree how to make sufficient and appropriate resources available; and
  • Evaluating the impact that the insufficient or inappropriate resources may have on the nature, timing and extent of the group engagement team’s direction and supervision of the component engagement team and the review of their work.

Component auditor responsibilities

The component engagement leader takes overall responsibility for determining the sufficiency of the competence and capabilities of the component engagement team to perform the assigned work, including sufficient time. The component engagement leader informs the group engagement leader if, in their judgment, resources assigned are insufficient or inappropriate and the group engagement leader assesses the sufficiency of any actions taken or to be taken by the component engagement leader in response.

Financial reporting framework or group accounting considerations

OAG Guidance

Group engagement teams may not assume that component auditors, whether from another OAG audit team or an external firm/auditor, are competent to audit whether the component’s financial statements have been prepared in accordance with the financial reporting framework that applies to the group financial statements (the “applicable group financial reporting framework”).

The group engagement leader and team obtain an understanding of the component auditor’s knowledge and expertise of the applicable group financial reporting framework. If the group engagement leader and team determine that the component auditor’s knowledge and expertise of the applicable group financial reporting framework is insufficient or inappropriate, the group engagement leader takes appropriate action, for example:

  • Increasing the involvement of the group engagement team in the component audit in order to provide the necessary financial reporting framework competence in the audit work performed.
  • Using specialists in accounting or auditing with the necessary financial reporting framework competence to assist the component auditor.
  • Performing work directly on the component’s financial information (subject to agreement from group management and any cross‑border working restrictions) without utilizing that component auditor, in order to obtain sufficient appropriate audit evidence over the financial information of the component).

If the group engagement team instructed the component auditor to only perform specified procedures with respect to the financial statements or financial information of the component, the component auditor may not need any knowledge of the applicable group financial reporting framework.