Page 120 - AAA Integrated Workbook STUDENT S18-J19

Chapter 8 4

Completion & reporting

5.1 Review of the work of the component auditor

 The group auditor must:

 Review the work of the component auditor to ensure it is sufficient and
appropriate to rely on for the purpose of the group auditor's report. This may be
achieved by the component auditor sending the group auditor a questionnaire
or checklist which identifies the key aspects of the audit.

 Discuss any significant matters that have arisen with the component auditor or
group management, as appropriate.

 Make an assessment as to whether any further work is needed.

 Consider whether the aggregate effect of any uncorrected misstatements will
have a material impact on the group financial statements.

5.2 Other completion activities

Subsequent events, going concern and final analytical procedures will need to be
considered for the group in the same way as they are considered for single entity
audits.

5.3 Letters of support

If a subsidiary has going concern issues the parent company may offer financial
support to enable it to continue trading for the foreseeable future. If this is the case
the directors must give the component auditor a letter of support which confirms their
intention to support the subsidiary. This is also known as a comfort letter.

The component auditor should not take this at face value. They should consider the
position of the parent and the group to help identify whether it has the resources to
fulfil its promise of support before accepting the letter as sufficient appropriate
evidence of the going concern basis for the subsidiary.

The group auditor must consider the impact of the going concern issues for the group
as a whole.

The parent company must disclose this guarantee of assistance in their financial
statements.

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