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Exceeding Expectations. Always. — Business Advisors and CPAs

Summary of SAS – Group Audits

 
  • Effective for periods ENDING after 12/15/2012
  • Definition of “component” for purposes of this SAS is not the same as “component unit” although a component unit is a part of a “component”
  • Operational, organizational, & legal considerations need to be considered.
  • Indicators of a component:
    1. Another auditor does part of the audit
    2. Separate legal entity
    3. Separate governance structure
    4. Outsourced operations
    5. Equity method investment
  • Additional considerations for a government:
  • Components need to be evaluated within each opinion unit
  • Where there is another auditor or legally separate entity, these are automatically a component
  • Pension or OPEB trust funds are likely components
  • Departments within a major fund that are separately managed may also be components
  • Identify & assess risks of material misstatements at GROUP level
  • Identify significant accounts & disclosures at GROUP level
  • Identify significant components
  • Determine timing & type of audit work to be done at significant & non-significant components
  • Determine nature, timing, & extent of work to be done at GROUP level
  • Based on individual financial significance
    1. Use a benchmark & percentage (like calculating tolerable misstatement)
  • Also if risk of material misstatement exists even if not individually financially significant
  • Do they understand & will comply with ethical requirements (including independence)
  • Professional competence
  • Will need to be evaluated through date of overall audit report
  • Have component unit auditor update subsequent event procedures from date of their audit report to date of overall audit report
    1. It may be advisable for management of primary government enter into a written agreement with the component unit that they will request their auditors to perform these procedures & forward results to primary government (group) auditor
  • If CU auditor refuses to do these procedures, will need the component unit management to provide information to group auditor to be able to evaluate subsequent events
  • Request written representation from CU management
  • Review interim F/S, budget to actual reports
  • Inquire of CU management
  • Read CU minutes
  • Etc
  • Confirm that they will cooperate
  • They will follow ethical requirements including independence
  • They will provide a list of related parties
  • They will communicate to group auditor matters relevant such as findings, conclusion, opinion,
  • They will provide a list of passed AJEs so group auditor can assess effect at group level
  • Group engagement team must gain sufficient understanding of group, components, & environment to:
  • Type of work to be done on components
  • Involvement of other auditors
  • Any limitations on access to information
  • Fraud or suspected fraud at component
  • Identifying Significant Components
  • Understand Component Auditor
  • Subsequent events for component
  • Communication with Component Auditor (existing letter may need to be expanded somewhat)
  • Document all of these procedures
  • Communicate with those charged with governance (planning stage)