As group auditors in Singapore enter their third year under auditing standard SSA 600 (Revised) titled Special considerations – Audits of Group Financial Statements (Including the Work of Component Auditors), the practical friction points are emerging. The standard, Singapore’s adoption of the IAASB’s ISA 600 (Revised), took effect for periods beginning on or after 15 December 2023. It widened the scope beyond legal groups to combined financial statements and aggregated information from branches or business units.
The standard replaced the familiar ‘significant component’ model with a risk-based approach, under which group auditors assess risks of material misstatement at group level before deciding where work is done. It introduced component performance materiality and aggregation risk – the untested portion of the group – and made component auditors part of the group engagement team, with the group engagement partner answering for their work.
‘You take responsibility for all the work that’s being done’
‘Previously, the involvement of the group audit team in the work of the component auditor may be limited. But now, it’s not,’ said Susan Foong FCCA, partner and practice leader of assurance at Baker Tilly, during the ACCA Technical Symposium 2026, held online in September. ‘Component auditors are part of the group audit engagement team, and the group auditor needs to be sufficiently and appropriately involved in their work. You take responsibility for all the work that’s being done.’
Beyond the numbers
Risk assessment has traditionally been driven by financial significance, but size alone no longer suffices, Foong said.
‘We also must look at events and conditions,’ she explained. ‘The guiding principle is, we must always plan with the objective to obtain sufficient appropriate audit evidence, to cover significant classes of transactions, account balances and disclosures, so that we can opine on the group financial statements.’
In one scenario she described, a group team left out a subsidiary whose balances were mostly intercompany and whose income was small. A planning discussion with group management revealed it had invested in structured products with embedded options.
Seeing a higher inherent risk in their measurement and accounting, the group auditor scoped in the investments for testing, though not the whole subsidiary. ‘Even though the numbers don’t look big, we need to be mindful of certain activities, transactions or events that the subsidiaries may be involved in,’ Foong said.
‘You have to assess whether the component audit teams are competent and capable’
Group teams should also ask component auditors whether their risk assessments match the group’s, particularly when working with overseas component auditors. ‘Sometimes when we push out one-way instructions, we may miss some of the feedback that may be useful for us at group level,’ she said.
Evidencing oversight
SSA 220 (Revised) places responsibility on the group engagement partner, so group auditors must be able to demonstrate direction, supervision and review of component auditors’ work, Foong continued. But the level of oversight should be scaled to each component team, not applied uniformly. ‘One of the considerations is you have to assess whether the component audit teams are competent and capable,’ she said.
Group teams should weigh whether a component team complies with quality management standards, whether it faces regulatory inspection, its experience with similar clients and whether significant risks sit in that component. Where they do, the extent of direction and review increases.
Group auditors should build in several touch points – from communicating scoping decisions at planning to joining closing meetings – so they can check that component work meets group requirements, Foong said. Each of those touch points should also leave a paper trail. ‘It can be by minutes of meetings, it can be by correspondence, your review of their work performed. Otherwise, you cannot demonstrate that,’ she said.
‘It’s very important that you have the summary of the work performed’
The test is whether an experienced auditor with no previous connection to the engagement could understand the work done and reach the same conclusions, particularly for significant judgments audited at component level. ‘It’s very important that you have the summary of the work performed, how they audit on the significant judgment and the conclusion reached as part of your documentation,’ Foong noted.
A common complication arises when a firm is appointed group auditor only after the component audits are finished. ‘It doesn’t mean you cannot accept the group audit, but you have to see how you can still comply with the requirements,’ she said.
Late-appointed group auditors should check whether component auditors will revisit discussions with the group team and top up their work where needed. Where restrictions on working with component auditors make compliance unlikely, Foong added, that should weigh on acceptance and continuance decisions.
More than planning
Even after careful planning, scoping and supervision, group auditors can still find themselves short of evidence late in the audit, Foong warned: ‘Having done the proper planning, can things still go wrong?’
A fall in group materiality, for instance, can pull previously excluded components into scope. Sample sizes used by a component team may also prove insufficient for group purposes, particularly where the two firms’ methodologies differ.
If group teams do not challenge component auditors during fieldwork, lapses in professional scepticism may surface only after the component work is finished, leaving little time to complete the group audit. Late findings – such as control deficiencies reported by component auditors or complex areas needing specialist input – create the same squeeze, she said. The remedy is to stay involved throughout, especially where component auditors are handling significant risk areas.
What to do about the untested remainder – the aggregation risk – is less settled. Asked whether out-of-scope components and unexamined balances within scoped-in components should fall below group performance materiality, Foong said: ‘It would depend on your firm’s audit methodology. Some firms will take it that it’s below group [performance materiality], some will do a discount, or they will have another mechanism to check.’
Whatever approach a firm takes, the group audit file must ‘adequately demonstrate compliance’ with the standard. ‘Sometimes we do the work, but we didn’t document, then there’s a lack of demonstration that we have complied with the standard,’ she added.
Preparers of group accounts should take note, too, Foong concluded, because the standard now determines how their auditors will approach the engagement.
More information
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