SA 600 governs audits of group financial statements where one or more components — subsidiaries, divisions, branches — are audited by a different auditor, called a component auditor. The group engagement partner is explicitly responsible for the direction, supervision and performance of the group audit, and for the auditor's report on the group financial statements, regardless of how much of the actual fieldwork was performed by component auditors. Using a component auditor's work is a form of audit evidence to be evaluated, not a delegation of the opinion itself — the group auditor remains accountable for forming the group opinion even where they performed none of the component-level fieldwork directly.
What the group auditor is required to do, specifically
- 01Obtain an understanding of each component and its environmentSufficient to identify components that are individually financially significant, and to assess the risk of material misstatement in the group financial statements overall.
- 02Determine the type of work required at each componentA full-scope audit at a financially significant component; specified procedures at others; nothing further at components that present no significant risk of material misstatement to the group.
- 03Communicate requirements to the component auditor clearlyScope, timing, materiality (including component materiality, set below group materiality), and the specific matters to communicate back to the group team.
- 04Evaluate the component auditor's work, not just collect itReviewing their work papers or their reporting to the group team, assessing whether it's sufficient and appropriate for the group opinion's purposes — not accepting a clean signed-off report as the end of the group auditor's own responsibility.
Regulatory requirement
SA 600 requires the group engagement team to be involved in the component auditor's risk assessment at financially significant components, and explicitly considers whether the group team needs to be involved in further audit procedures at those components — a group auditor who never engages with the component auditor beyond receiving a final report has not met the standard's active-involvement requirement.
Component materiality — why it's a separate number
| Purpose | |
|---|---|
| Group materiality | Set for the group financial statements as a whole, same logic as SA 320 applied at group level |
| Component materiality | Set LOWER than group materiality for each component, specifically to reduce the risk that the aggregate of individually immaterial misstatements across several components adds up to something material at group level — the same aggregation logic SA 320's performance materiality uses, applied across components rather than within a single entity |
A component audited to component materiality that happens to be the SAME as group materiality has very likely been set incorrectly — the whole point of a separate, lower figure is to guard against aggregation risk across multiple components, which a matching number cannot do.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- Audit workflow & automationSA 620: using the work of an auditor's expertA qualified expert's signature on a report is not, by itself, sufficient audit evidence. SA 620 is about what the auditor still has to do with that report.
- Audit data & extractsConsolidating multi-branch data for a single auditSeparate company files per branch, inter-branch transfers that need eliminating, and vendors shared across branches that look like duplicates. Consolidating multi-branch data before testing starts.
- Audit workflow & automationSA 700: forming an opinion, and what "true and fair" actually requires concluding onFinishing every planned procedure isn't the same as forming an opinion. SA 700 is the step that happens after the checklist, not instead of it.
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