Component and group auditors: the same file, two readings

A UK subsidiary of a German or French group often has two audiences for the same numbers: the group engagement team, working to the group's instructions and timetable, and the auditor of the local statutory accounts. When they ask for different evidence at different times, the entity does the work twice.

Why the readings differ

• Materiality. The group sets a threshold for the component; local statutory materiality is set separately. The same balance can be immaterial to one and in scope for the other.
• Timetable. The group reporting deadline often falls weeks before the local statutory audit is planned.
• Framework. Group instructions refer to IFRS or HGB positions; the local accounts are prepared under FRS 102 or FRS 101.
• Scope. The revised group audit standard, ISA 600 (Revised), gives the group engagement team a more direct role in deciding what work is done at component level, which can change what is asked locally from one year to the next.

What helps

• Read the group audit instructions as soon as they arrive, and share the relevant parts with the local auditor.
• Build one list of requested evidence that serves both teams.
• Reconcile the reporting pack to the local accounts before fieldwork, not during it.
• Give both teams one person to deal with, who understands both frameworks.

Having worked as component auditor for subsidiaries of German and French groups, and on group reporting for Deutsche Börse entities, we know what each side needs to see, and in which order.