ISA 600 (Revised) – The Key Changes

In this blog, we will set out the key changes in ISA 600 (Revised) and what to expect in the audit of group financial statements.  ISA 600 (Revised) deals with the special considerations that apply to a group audit, including those circumstances when component auditors are involved, and is effective for audits of group financial statements for a period beginning on or after 15 December 2023, with early adoption permitted.
The new and revised requirements aim to strengthen the auditor’s responsibility towards professional scepticism in planning and performing group audits, enhancing two-way communications between group auditor and component auditor, and improving documentations.  

Encourage proactive management of quality

ISA 600 (Revised) introduced a proactive risk-based approach framework for planning and performing a group audit engagement. This means a greater focus is emphasized on identifying and assessing the risks of material misstatement, planning an appropriate approach to the audit and performing audit procedures that respond to the assessed risks.
The standard also provides better clarification on the requirements in ISA 220 (Revised). These include the assignment of sufficient and appropriate resources in a group audit, the involvement of component auditors in an engagement team and the direction and supervision of the engagement team and review of their work.

Keeping the group audit standard fit for purpose

The scope of ISA 600 (Revised) further clarified the definition of component auditor and the related application of the standard applies to entities with branches and divisions, shared service centres and non-controlled entities. The standard also focuses on the consideration of risks of material misstatement at the assertion level of group financial statements that are associated with the components.
The standard also clarifies what the group auditor needs to document in relation to different situations, given there can be restrictions on access to people and information that may exist and component auditor audit documentation. Additionally, the standard also provides guidance on how to overcome these restrictions. The concept of materiality and aggregation risk apply in group audit is also further explained by the standard.

Reinforcing the need for robust communications and standard

ISA 600 (Revised) highlights the importance for robust two-way communication between the  group auditor and component auditor. The standard strengthens and clarifies various aspects in communication between the auditors including communicating the relevant ethical requirements, determining the competence and capability of component auditor and determining the appropriate nature, timing and extend of involvement by the group auditor in the work of the component auditor.

Emphasizing the importance of professional scepticism

The standard also highlights the importance of exercising professional scepticism in the group audit. Professional scepticism is accentuated in the group auditor’s evaluation on whether sufficient appropriate audit evidence has been obtained to provide basis for forming an opinion on the group financial statements As a conclusion, with a more proactive risk-based approach being introduced, there will be more responsibilities towards the group auditor to monitor the audit engagement team, which will include the work of component auditors. 

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