The purpose of this assignment is to clarify the challenges group auditors encounter in audits of smaller group financial statements focusing on the cases where group auditors’ also act as component auditors. The annual reports from the public supervisory authorities reveal specific issues regarding the compliance of documentation for smaller audit offices, which primarily include shortcomings in the planning.
For the purposes of analysis, relevant professional experts have contributed with their sights regarding the most efficient way of providing the documentation in these audits of smaller group financial statements. This also involves their suggestions as to how the group audits in these cases should be carried out in practice. Through the analysis of the supervisory authorities' results, the annual audit reports here from can determine which ranges of the group audits that are insufficient.
The analysis explains which areas in the audits of smaller group financial statements that are essential to submit in the audit file, regardless of the fact that they also act as component auditors. The results of the analysis are that the requirements of the ISA 600 are obligatory from a compliance point of view, but where areas relating specifically to the documentation of the group auditor and component auditor's communication as well as the audit instructions do not require the same ordinary audit procedures. On the other hand, formalized statements regarding Group Auditors simultaneous role as Component Auditor is needed. The documentation must be complied at the same level but in these cases without regular communication.
The fact that, the group auditor possesses this double role also does not take away the need for conducting group audit planning in a normal manner, where the group auditor must identify significant components according to their size and risk as with in normal risk-based approach i.e. scoping. For this particular accounting segment, there are a smaller presence of consolidation packages, internal controls and group controls on the Group’s financial information. In addition to the importance that the Group Auditor cannot base his audit on these controls, these factors also have the consequence that there is a need for a greater degree of audit for the components, which can be estimated to be 85% depending on the Group Auditor's professional judgement. On the remaining components, there should be prepared an Auditor’s Review Report on Interim Financial Statements or the Danish Standard of Auditing for smaller companies, “Udvidet Gennemgang” may be useful, which is considered by law, as auditing, but in group context, it does not have a higher value than review, which the group auditor must also keep in mind.
For group auditors in the SME segment there may be circumstances where there are no system of quality control for audits and reviews of financial statements In the case of group audits that give group auditors in this segment poorer conditions for providing the documentation efficiently and properly. This fact will in some cases results in unconscious incompetence that may be due to the fact that Group Auditors do not get familiar with the ISA 600 for Group Audit through the IT tools. These facts may cause a further need for broader theoretical and professional knowledge of the ISA 600 Auditing Standard. They will furthermore need for to perform a more creative approach the audits of group financial statements without these tools.
|Uddannelser||Cand.merc.aud Regnskab og Revision, (Kandidatuddannelse) Afsluttende afhandling|