Annual Audit Manual
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2362 Evaluating the sufficiency and appropriateness of audit evidence obtained
Dec-2023
In This Section
Inability to access non-OAG component auditor's work
Evaluating the sufficiency and appropriateness of audit evidence on a group level
CAS Requirement
The group engagement team shall evaluate the component auditor’s communication (see paragraph 41). The group engagement team shall (CAS 600.42):
(a) Discuss significant matters arising from that evaluation with the component auditor, component management or group management, as appropriate; and
(b) Determine whether it is necessary to review other relevant parts of the component auditor’s audit documentation. (Ref: Para. A61)
If the group engagement team concludes that the work of the component auditor is insufficient, the group engagement team shall determine what additional procedures are to be performed, and whether they are to be performed by the component auditor or by the group engagement team (CAS 600.43).
CAS Guidance
What parts of the audit documentation of the component auditor will be relevant to the group audit may vary depending on the circumstances. Often the focus is on audit documentation that is relevant to the significant risks of material misstatement of the group financial statements. The extent of the review may be affected by the fact that the component auditor’s audit documentation has been subjected to the component auditor’s firm’s review procedures (CAS 600.A61).
OAG Guidance
Communication for the component auditor is further discussed in OAG Audit 2343. Review of the component auditor’s work is discussed in OAG Audit 2361.
Component auditors from external firms/auditors may refuse to grant us access to their audit documentation for various reasons. Such reasons include, but are not limited to:
- local jurisdiction which imposes restrictions on access to working papers to an auditor in other territories,
- component auditor’s firm risk management concern, and
- client confidentiality concern.
In these cases, and where a consent letter from the entity and a letter of understanding about the conditions for access from the component auditor will not resolve the component auditor’s concerns, we need to evaluate the impact of such restriction on our ability to obtain sufficient appropriate audit evidence on the component. The group engagement team also considers the impact of such restrictions on the nature, timing and extent of their direction and supervision of the component auditor and review their work The group engagement leader may find it useful to consult in accordance with OAG Audit 3081.
For further guidance on restrictions on access to information refer to OAG Audit 2321
CAS Requirement
The engagement partner shall review audit documentation at appropriate points in time during the audit engagement, including audit documentation relating to (CAS 220.31):
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Significant matters;
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Significant judgments, including those relating to difficult or contentious matters identified during the audit engagement, and the conclusions reached; and
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Other matters that, in the engagement partner's professional judgment, are relevant to the engagement partner's responsibilities.
On or before the date of the auditor's report, the engagement partner shall determine, through review of audit documentation and discussion with the engagement team, that sufficient appropriate audit evidence has been obtained to support the conclusions reached and for the auditor's report to be issued (CAS 220.32).
The auditor is required to obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably low level and thereby enable the auditor to draw reasonable conclusions on which to base the auditor’s opinion. The group engagement team shall evaluate whether sufficient appropriate audit evidence has been obtained from the audit procedures performed on the consolidation process and the work performed by the group engagement team and the component auditors on the financial information of the components, on which to base the group audit opinion (CAS 600.44).
The group engagement partner shall evaluate the effect on the group audit opinion of any uncorrected misstatements (either identified by the group engagement team or communicated by component auditors) and any instances where there has been an inability to obtain sufficient appropriate audit evidence (CAS 600.45).
CAS Guidance
When the group audit opinion is modified because the group engagement team was unable to obtain sufficient appropriate audit evidence in relation to the financial information of one or more components, the Basis for Modification paragraph in the auditor’s report on the group financial statements describes the reasons for that inability without referring to the component auditor, unless such a reference is necessary for an adequate explanation of the circumstances (CAS 600.A9).
If the group engagement team concludes that sufficient appropriate audit evidence on which to base the group audit opinion has not been obtained, the group engagement team may request the component auditor to perform additional procedures. If this is not feasible, the group engagement team may perform its own procedures on the financial information of the component (CAS 600.A62).
The group engagement partner’s evaluation of the aggregate effect of any misstatements (either identified by the group engagement team or communicated by component auditors) allows the group engagement partner to determine whether the group financial statements as a whole are materially misstated (CAS 600.A63).
OAG Guidance
When reviewing the work of the component auditor, the group engagement team needs to consider whether its evaluation and/or the review of relevant parts of a component auditor’s audit documentation impacts the group engagement team’s determination made during audit planning of the nature, timing and extent of the group engagement team’s involvement in the work performed by the component auditors (OAG Audit 2324).
The group engagement team may, based on its review of the component auditor's work and related documentation, request the component auditor to perform further procedures (e.g., to address the group engagement team's review comments).
If the group engagement team’s evaluation affects the nature, timing, and extent of the group engagement team’s direction and supervision of the component auditors and the review of their work, the group engagement team needs to update the documentation in the audit strategy.
OAG Guidance
The group engagement team prepares a consolidated summary of uncorrected misstatements that includes all significant uncorrected misstatements from the components.
The summary of uncorrected misstatements provided to the group engagement team needs to be based on the de minimis SUM posting level provided by the group engagement team in the group instructions.
Where the component auditor issues a report on the component financial information for statutory, regulatory or other reasons, they determine whether to maintain a separate summary of uncorrected misstatements for that purpose. This may be necessary where there is a significant difference in the materiality levels used for purposes of reporting to the group and the other report.
Detailed guidance relating to evaluating uncorrected misstatements is included in OAG Audit 9010.