On a group audit the group engagement partner signs one opinion on the consolidated accounts and remains fully responsible for it, even where other firms audit subsidiaries. ISA (UK) 600 (Revised September 2022) requires the group auditor to decide where work is needed, check that component auditors are competent and independent, direct and supervise them, set the materiality they work to, and review enough of their work to be satisfied. The auditor’s report does not mention component auditors.

Which standard applies and since when?

ISA (UK) 600 (Revised September 2022), Special Considerations: Audits of Group Financial Statements (Including the Work of Component Auditors), is effective for audits of group financial statements for periods beginning on or after 15 December 2023. It applies to every group audit regardless of size, but paragraph 10 notes that where the group auditor does all the work itself, the requirements that depend on involving component auditors are not relevant.

Group financial statements for this purpose include not only full consolidation but also proportionate consolidation, the equity method, combined accounts of entities under common control and the aggregation of branches or divisions. Whether a parent has to prepare group accounts at all is a separate company law question, covered in when a parent company must prepare group accounts and consolidated accounts under FRS 102.

Who is the group auditor and who is a component auditor?

Paragraph 14 sets out the key terms:

Component
An entity, business unit, function or business activity, or a combination, chosen by the group auditor for planning and performing the audit. A component need not be a separate legal entity.
Component auditor
An auditor who performs audit work on a component for the group audit. The component auditor is part of the engagement team and may be from another firm.
Group auditor
The group engagement partner and the rest of the engagement team other than component auditors. It sets the group strategy and plan, directs and supervises component auditors, reviews their work and evaluates whether the evidence supports the group opinion.
Key audit partner
A term from Schedule 10 to the Companies Act 2006 that includes the partner designated at group level and those designated at the level of material subsidiaries.

A UK addition makes the group engagement partner bear overall responsibility for compliance with all relevant ISAs (UK) and for the auditor’s report being appropriate, with the partner’s firm responsible for the quality management system that supports them.

How does the group auditor plan the work?

Before accepting or continuing the engagement the group engagement partner must decide whether sufficient appropriate evidence can reasonably be expected. Group management must acknowledge its responsibility to give the engagement team access to information and unrestricted access to people across the group. If group management itself imposes restrictions that would lead to a disclaimer of opinion, the partner should decline or withdraw where the law allows.

Under paragraph 22 the group auditor sets the group audit strategy and plan, including the components at which audit work will be done and how far component auditors are to be involved. The approach is risk based. Paragraph 5 explains that the group auditor uses judgement to determine the components at which work will be done, based on its understanding of the group and factors such as the ability to perform procedures centrally, the presence of shared service centres and common information systems and controls. Paragraph 33 makes the group auditor responsible for identifying and assessing the risks of material misstatement of the group accounts, including those arising from the consolidation process.

What must the group auditor check about component auditors?

Before relying on another firm, the group engagement partner must:

  • evaluate whether the group auditor can be sufficiently involved in the component auditor’s work, and get the component auditor’s confirmation that it will cooperate (paragraphs 23 and 24);
  • make sure component auditors know the relevant ethical requirements and confirm they will comply. In the UK this includes confirming they can meet the relevant parts of the FRC’s Revised Ethical Standard 2024, and a further confirmation before the report is dated that those requirements have been fulfilled (paragraph 25 and the UK addition to it); and
  • determine that component auditors have the competence, capabilities and time needed, taking into account any inspection or monitoring results available (paragraph 26).

If a component auditor does not meet the ethical requirements, or the partner has serious concerns about these points, paragraph 27 requires the group auditor to obtain the evidence for that component without involving that auditor. For more on the ethical rules, see auditor independence and the Ethical Standard.

How is materiality set for components?

Where balances are spread across components, paragraph 35 requires the group auditor to set component performance materiality, which must be lower than group performance materiality to address aggregation risk, the risk that uncorrected and undetected errors across components add up to more than group materiality. It also sets a threshold above which component misstatements must be reported to the group auditor, which must not exceed the amount regarded as clearly trivial to the group accounts. Both figures are communicated to the component auditor. See materiality in audit for how the group figures are set.

Illustration only. Group materiality is £1,000,000 and group performance materiality £750,000. The group auditor sets component performance materiality of £400,000 for a large overseas subsidiary and £250,000 for a smaller one, and asks both component auditors to report every misstatement above £50,000, the group’s clearly trivial threshold.

How is the component auditor’s work directed and reviewed?

Paragraph 28 makes the group engagement partner responsible for the nature, timing and extent of direction, supervision and review, focusing on areas of higher assessed risk, significant risks and areas of significant judgement. Communication runs both ways. The group auditor sends instructions covering its expectations, related parties identified by group management and any going concern doubts. Paragraph 45 requires the component auditor to report back, including:

  • the financial information it worked on and whether it did the work requested;
  • whether it complied with the ethical requirements;
  • corrected and uncorrected misstatements above the threshold;
  • indicators of management bias, control deficiencies, non compliance with laws and fraud or suspected fraud; and
  • its overall findings and any going concern doubts.

For higher risk areas where the component auditor designs the procedures, paragraph 42 requires the group auditor to evaluate whether they were appropriate. Paragraph 47 requires the group auditor to decide how much more of the component auditor’s documentation to review, considering the work done, the auditor’s competence and the supervision given. If the work is not adequate, paragraph 48 requires the group auditor to decide what more is to be done and by whom.

UK additions go further. The group auditor must ask the component auditor to agree to the transfer of relevant documentation as a condition of using its work, and must evaluate and review the component auditor’s work for the group audit. Where that agreement cannot be secured, the group auditor must take appropriate measures, such as doing additional work, and inform the competent authority.

What powers help the group auditor get information?

Section 499 of the Companies Act 2006 gives a company’s auditor a right to require information and explanations from UK incorporated subsidiary undertakings and their officers, employees and auditors. For overseas subsidiaries, section 500 lets the parent’s auditor require the parent to obtain the information, and the parent must take all steps reasonably open to it. Under section 501 it is an offence to knowingly or recklessly give an auditor misleading, false or deceptive information, and failures to comply with sections 499 and 500 can also be offences.

What goes on the file and in the report?

Paragraph 59 lists what the group auditor must document, including the basis for determining components, component performance materiality and the reporting threshold, the basis for concluding that component auditors are competent, the direction, supervision and review carried out, and the response to component auditors’ findings. UK additions require enough documentation for the FRC or the recognised supervisory body to review the group audit, and either copies of, or a right of access to, component auditors’ working papers relevant to the group audit. ICAEW’s Audit Regulations contain similar requirements for third country component auditors. See audit documentation.

Paragraph 53 says the auditor’s report on the group accounts must not refer to a component auditor unless law or regulation requires it, and any such reference must make clear it does not reduce the group engagement partner’s responsibility. Those charged with governance must be told about concerns over the quality of any component auditor’s work and how they were addressed.

What are the common mistakes?

  • Sending standard instructions without tailoring them to the group risks or setting component materiality.
  • Accepting a component auditor’s clearance memo without evaluating the work behind higher risk areas.
  • Failing to obtain the UK ethical confirmations, including the one needed just before the report is dated.
  • Leaving the consolidation, including adjustments and sub consolidations, outside anyone’s audit plan.
  • Having no agreement giving access to overseas component working papers when the FRC asks for them.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.