AICPA Amends Guidance on Component Auditors
By Anne Rosivach
- AU-C Section 600, "Special Considerations–Audits of Group Financial Statements (Including the Work of Component Auditors)," and
- AU-C Section 800, "Special Considerations–Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks."
AU-C Section 600
- A firm in one location uses resources from one of their firm's other offices or from another firm to conduct an inventory observation in another location; or
- A firm audits consolidated financial statements for a parent company and its subsidiaries, one of which has engaged another external audit firm (a component auditor) to audit its separate financial statements.
3. Group engagement partners are required to gain an understanding of the component auditors and determine the extent the group engagement team will be involved in the work of the component auditors, then choose to either:
- Assume responsibility for, and thus be required to be involved in, the work of component auditors, in which case the group engagement team would perform additional procedures and issue the standard report, or
- Not assume responsibility for, and accordingly make reference to, the audit of a component auditor in the auditor's report on the group financial statements.
4. When the auditor chooses to assume responsibility for the work of the component auditor:
- The group engagement team is required to be involved in the risk assessment of a significant component.
- The group engagement team is required to request the component auditor notify the team of any relevant subsequent events.
- Additional communications are required.
In addition, SAS No. 127 states that the amendments to AU-C Section 600 "permit making reference to the audit of a component auditor in the auditor's report on the group financial statements when the component's financial statements are prepared using a different financial reporting framework than that used for the group financial statements, if certain conditions are met."
- The amendments to SAS No. 122 Section 600 are effective for audits of group financial statements for periods ending on or after December 15, 2012.
- The amendments to SAS No. 122 Section 800 are effective for audits of financial statements for periods ending on or after December 15, 2012.