Acca aaa s21 Notes

6. Other information required for the group audit
The group auditor will also require some information about components which is of no relevance to 
the components. For example:
Subsidiary A has sold goods at a mark-up to Subsidiary B and these are in closing inventory. 
Unrealised profits are a group issue, but not an issue in the financial statements or audit of the 
individual subsidiaries. The component auditor will have to supply this information to the group 
auditor. Similarly, if non-current assets had been transferred.
Differences in payables/receivables accounts in the separate subsidiaries are not an issue, but on 
consolidation current accounts will have to be reconciled.
If the acquisition took place part way through the year, then the results of the acquired company will 
have to be split into pre- and post- acquisition. This is usually done on a time basis, but significant 
differences in trading before and after acquisition (eg trading is seasonal) could mean that another 
approach is preferred.
Goods in transit or cash in transit between components will have to be sorted out upon consolidation.
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Other matters concerning components that may give risk to risks of material misstatement in the 
consolidated financial statements include:
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Events after the reporting date.
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Significant control weaknesses.
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Any known related party transactions.
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Suspicions of management bias.
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Adjustments that might be necessary for non-uniform accounting policies or non-coterminous 
reporting dates.