Group Audits when some subsidiaries are under audit threshold?
Hi, Just wondering if anybody could please help me clarify an issue regarding the group audit. The firm that I am working for has a client who, after restructuring the whole business portfolio, has recently formed a group consisting of 10 companies. All companies including the parent company require an audit except for 4 non-audit companies due to being under the audit threshold. Our firm has been appointed as the accountant and the auditor for preparing and auditing the individual companys' financial statements and the consolidated financial statement of the group as a whole. Now as our firm would be auditing and reporting on the conslidated financial statement of the group so my question is that what are the audit implications as to the 4 non-audit companies which would be the part of the consolidated financial statement. Any comments would be highly appreciated. I have tried to make the question as clear as possible but would apologise if i still have left any ambiguity and welcome any clarifications. God Bless!
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Answer 1 :
The 4 companies might still fall into your testing scope based on the composition of the consolidated balances. If the 4 companies make up a large proportion of an account that meets your scope, you would still test. It is still possible to select for testing because its balances will be included in the consolidated totals. It will also depend upon the testing strategy. If you are using some sort of random selection, it is possible to choose testing samples from any company. However, if using a judgmental approach, you will likely choose selections with the largest balances (so, less apt to come from the 4 companies under your threshold).
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