Page 121 - AAA Integrated Workbook STUDENT S18-J19

Group and transnational audits

5.4 Auditor’s report

 Where one or more of the subsidiaries has a modified auditor's report
(regardless of who audited the subsidiary) the group auditor must consider the
impact of the issue on the group financial statements, according to group
materiality levels.

 If the matter is not material in a group context, an unmodified report will be
issued.

 If the matter is material to both the component and the group the auditor should
consider whether the issue causing the modification can be resolved as a
consolidation adjustment and aim to resolve the matter with the client. If so, an
unmodified report can be issued.

 If the matter cannot be resolved through the consolidation process, the
modification should be carried through to the group auditor's report, (e.g. if the
evidence is not available to support the balance).

 Note that a matter which is pervasive to the component may be material but not
pervasive to the group. In which case, a disclaimer of opinion or adverse
opinion in a subsidiary will be altered to a qualified opinion in the group auditor's
report.

5.5 Reporting to those charged with governance

The following matters should be reported to those charged with governance of the
group:

 Overview of the work performed and involvement in the component auditor's
work.

 Areas of concern over the quality of the component auditor's work.

 Difficulties obtaining sufficient appropriate evidence.

 Fraud identified or suspected.

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