Acca aaa s21 Notes

7. The component auditor
It is clear from the above that the group’s auditor expects a lot of cooperation and expertise from the 
component auditor. There is presumably relatively little problem if the group auditor and the 
component auditors are part of the same firm or network using the same documentation and 
techniques and, of course, it is in their mutual interest to cooperate. However, what if the auditors are 
different? Not only that, but what if they are from different legal and regulatory jurisdictions where, 
perhaps, the component auditors are not part of a respected professional body or do not follow 
International Standards on Auditing or accepted ethical codes (for example governing objectivity and 
independence)? How can the group auditor judge the competence of the component auditor? Do 
they have robust quality control systems in place? In summary, how can the group auditor place any 
reliance on work done by the component auditors? 
These matters should be assessed before the group auditor accepts the engagement to be the group 
auditor, and if the group auditor is not confident about the work that will be done by others, the 
engagement should be rejected. Nor should the group auditor accept the assignment if the parent 
does not promise the full cooperation of its subsidiaries for the group audit.
8. Significant components
Irrespective of the status of the component auditor, remember that the group auditor has overall 
responsibility for the group audit opinion so therefore cannot simply accept a component auditor’s 
opinion without some investigation. The amount of investigation depends on whether the 
component is judged to be a significant component of the group. 
ISA 600 
The Audit of Group Financial Statements
, defines a significant component as one that is:
(i) 
of individual financial significant to the group; or
(ii) 
is likely, due to its specific nature or circumstances, to include significant risks of material 
misstatement of the group financial statements.
For (i), the group auditor (or a component auditor on its behalf) must audit the component using