Audits of Group Financial Statements . 2013 GAO / CIGIE Governmental Accounting and Auditing Update Jeff Markert, Department of Professional Practice, KPMG LLP Scot Janssen, Federal Audit Partner, KPMG LLP. New AICPA Standard on Group Audits.
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2013 GAO / CIGIE Governmental Accounting and Auditing Update
Jeff Markert, Department of Professional Practice, KPMG LLP
Scot Janssen, Federal Audit Partner, KPMG LLP
AICPA AU-C Section 600 – Special Considerations – Audits of Group Financial Statements
(Including the Work of Component Auditors)
Project on Clarifying Auditing Standards
Effective: Now! Group Audits Ending After Dec. 15, 2012
It is a group audit because air traffic control towers are in every major airport.
It is a group audit because the its grants are material to the consolidated financial statements.
It is a group audit based on the auditors judgment.
It is a group audit because it has two components.
AU-C 600 Shifts Mindset of Group Auditor…
Type of component is based on group auditor judgment, and evaluation of whether the remaining financial information is significant
Not financially significant
But with significant risks
Factors to consider when setting component materiality:
The risk that the aggregate of (1) uncorrected and undetected misstatements and (2) individually immaterial misstatements may cause the group
financial statements to be materially misstated.
Evaluate whether the remaining financial information is significant
Component materiality is always the same for all components.
Component materiality cannot exceed 75% of group materiality.
Component materiality must be set below group materiality.
The sum of untested line item balances in components cannot exceed performance materiality.
OLD Standard (AU 543)
NEW Standard (AU-C 600)
(When Making Reference – par.41)
(Additional requirements for component
auditor to report to the group)
AU-C 600 -- Places Emphasis on Effective Two-Way Communications
(When Accepting Responsibility – par.61)
(When Making Reference para. 50 )
Such as ….
(When Accepting Responsibility para. 65 )
In addition – When Making Reference
The group auditor is not responsible for subsequent events of components after the date of the other auditor’s opinion
The group auditor can refer to either the audit opinion or review report issued by the component auditor
The group engagement team or component auditors should perform subsequent events procedures through the date of the group auditors’ report
Subsequent events procedures on components should only be performed by the auditor that audited the component
Other (additional) procedures required when not making reference