The Effect of Implementing ISA 600 Revised

Abstract

The purpose of this thesis is to examine whether the implementation of the International Standard of Auditing (ISA) 600 (R) has solved the issues related to the previous ISA 600, identified by IAASB and stated in their Invitation to Comment. Furthermore, the thesis examines and analyses the influ- ence of the group and component auditors in relation to the implementation of ISA 600 (R).

The issues identified are primarily related to lack of access to documentation, insufficient involve- ment of group auditors, communication issues between component and group auditors, dealing with shared service centers, aggregation risk, treatment of investments measured at fair value or cost, and overall uncertainty and lack of understanding regarding the timing, scope, and nature of work per- formed throughout the process.

To address the stated purpose of the thesis, we have reviewed the changes between ISA 600 and ISA 600 (R) and performed interviews with a group auditor, component auditor and auditor expert. Based on the analysis, we have concluded that the implementation of ISA 600 (R) has resulted in a signifi- cant impact for group auditors and component audits. The standard addresses key issues as mentioned above that are identified by the ITC. ISA 600 (R) aims to enhance communication, collaboration, and overall responsibility among the involved parties, leading to improved consistency and audit quality across components. Group auditors now have greater responsibilities and must obtain a deeper un- derstanding of the components, ensuring alignment of risk assessments throughout the group audit process. The revised standard also places great emphasis on communication, ensuring transparency between group and component auditors to mitigate the risk of misstatements.

ISA 600 (R) shifts from a rule-based to a more principle-based approach which includes a greater use of professional judgment. This allows a great length of flexibility, which can be advantageous in complex groups, but also introduces challenges related to the interpretation of the standard. The in- creased reliance on professional judgment raises the risk of divergent conclusions and inconsistent audit quality across group audits. It is concluded that not all issues have been solved and the imple- mentation has resulted in a great demand for further guidance by IAASB to implement the regulation to practical management.