Questions are around the procedures, importance and difficulties involved in per
ID: 443395 • Letter: Q
Question
Questions are around the procedures, importance and difficulties involved in performing group audits. Please assist in answering all questions. I greatly appreciate the assistance, thank you
1). What are the definitions of audit, group audit, group audit opinion, consolidated statements, consolidation policy, component auditor and significant component.
2). What are the sources of risk in group financial statements.
3). Who are the financial statement users and discuss the importance of quality audits to them.
4). What is the group audit process including advantages and pitfalls.
Explanation / Answer
1) An audit refers to the company's financial records and reporting activities. An audit is generally conducted for disclosure, compliance, taxation, legal or other purposes.
The parent company prepare its own audited financial statements incorporating the results of all subsidiary entities. The group financial statements are audited by the parent entity auditors, known as the Group Auditors.
The group auditor is responsible for providing the audit opinion on the group financial statements.
Consolidate financial statements are the statement of parent company along with subsidiary which includes assets, liabilities, equity, income, expenses and cash flows.
The consolidated financial statements include the accounts of the Company, its subsidiaries and those variable interest entities where parent company is the primary beneficiary under the Financial Accounting Standards Board.
The component auditor could be part of the group audit engagement partner's firm in a different location, a network firm, or another firm.
A component that is financially significant to the group or that is likely to include significant risks of material misstatement in the group financial statements.
2) The risk in group financial statements consists of mismatching of expenses, exchange rate risk if it is an export company, interest rate risk, equity price rate risk, comodity price risk, credit risk, etc.
3) The financial statement users are the board of directors, company owners, government, public, etc. The importance of quality audit is the company can use it for merger and acquisition, set the goals and objective for next financial year, improve the process in the company to make more profit, increase market share, etc.
4) The advantage of group audit process an auditor may find this section, adapted as necessary in the circumstances, useful when that auditor involves other auditors in the audit of financial statements that are not group financial statements.
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