2372 Use of our work and reports by other auditors where OAG is not the group auditor

Apr-2015

OAG Guidance

Where OAG is not the group auditor of a group, and one or more OAG audit teams are engaged to audit part of the group, those teams will cooperate with the group engagement team, to the extent possible, while observing OAG audit standards and policies.

Normally, we would expect the requests from the group auditor to be similar to those if the OAG were the group auditor. If there is a significant difference in the level of request, or if a component auditor has any concerns regarding the information and/or confirmations requested, consultation with Audit Services is advised.

The engagement leader is responsible for dealing with the issue of access to audit files and for ensuring that appropriate security practices are adhered to, should access be granted. Consultation with the Access to Information and Privacy (ATIP) Coordinator, and with Legal Services should occur where circumstances warrant.

Additional guidance is included in OAG Audit 1192.

OAG Guidance

Careful consideration is to be given to the appropriateness of accepting an engagement that involves the issuance of stand-alone audit reports to external firms/auditors in the context of a group audit. Such considerations include:

• Is there an appropriate financial reporting framework, for example, a group accounting manual?

The component auditor needs to be satisfied with the financial reporting framework and raise any concerns with the group auditors when accepting the engagement. If there is no group accounting manual or no group instructions, there is no financial reporting framework on which to base our report and the component auditor therefore can not usually report. In some rare circumstances, the component auditor may report following the group accounting policies set out in the group financial statements, if considered appropriate.

• Is the materiality level set by the group engagement team reasonable in the context of the component’s operations?

Where materiality appears unreasonable in relation to the component’s operations and/or the group instructions, the OAG component auditors need to discuss their concerns with the group engagement team. For example, if materiality is too high (e.g., materiality is greater than any line item on the balance sheet) it might be more appropriate to suggest a lower materiality or an alternative to the group auditor’s proposed type of work to be performed (e.g., change from an audit to specified procedures). Similarly, if materiality is too low, it may be impracticable to carry out the audit.

OAG Guidance

As a general rule, any report we issue in relation to our work is prepared pursuant to professional standards applicable to reports to third parties. If requested to do so, it is acceptable to complete audit questionnaires or checklists relating to the audit, provided:

• individual scope considerations are properly framed in the context of an audit of the financial statements as a whole;
• information is not requested in a manner that could be considered as providing separate opinions on individual financial statement disclosures.

Questions of a vague and general nature or questions that can be answered by the group auditor’s review of the financial statements or our report are not to be answered. If completion of a questionnaire or checklist is considered inappropriate, a letter may better serve to put responses in the proper context. Comments need to be as general as possible and not describe details of the audit program or conclusions. Words implying absolute proof, such as “verify,” need to be avoided. It is the engagement leader’s responsibility to review the information in the questionnaire and evaluate whether the information is appropriate before it is issued to the third party.

Confirming Compliance with Ethical Requirement and Sharing Quality Review (QR) Results

When requested by a non-OAG group engagement team to confirm our compliance with ethical requirements that are relevant to the group audit, including independence and professional competence in accordance with CAS 600.41(a), we would confirm compliance with the OAG Code of Values, Ethics and Professional Conduct and the rules of professional conduct and/or code of ethics applicable to the practice of public accounting issued by the relevant professional accounting body, including independence rules (OAG Audit 2328).

In some instances, a non-OAG group engagement team may request the results of QR reviews from the OAG component auditors. The results of quality reviews are not to be shared outside the OAG. If the component auditor requires further guidance, consultation with Audit Services is recommended.

OAG Guidance

Any audit, review procedure, or specified audit procedure reports we issue in relation to our work for a component audit should be prepared pursuant to professional standards applicable to reports to third parties.

Statutory Audit Report

When and if we are acting as the component auditor in a group audit conducted by an external firm/auditor, we are performing the statutory audit of the component’s financial statements. In such circumstances, our audit report for the statutory audit may also meet the needs of the group engagement team, if it is issued before the deadline for reporting to the group engagement team.

If it is agreed that the level of materiality determined by us in relation to the component’s financial statements for purposes of the statutory audit can also serve as the materiality for the work performed for the group audit, modification of the statutory report is not necessary.