Implementing ISA 600 (Revised): A Guide for Group Engagement Teams

Group audits have long posed unique challenges for auditors, especially when dealing with complex structures, cross-border components, and varying levels of risk. With the release of ISA 600 (Revised), effective for audits of financial statements for periods beginning on or after 15 December 2023, the International Auditing and Assurance Standards Board (IAASB) has taken a significant step toward modernising and strengthening the approach to group audits.

This revised standard introduces a proactive risk-based framework that enhances audit quality management, clarifies responsibilities, and promotes better coordination between group engagement teams and component auditors. For audit firms and professionals, understanding and implementing ISA 600 (Revised) is not just a matter of compliance, it’s of strategic importance.

‍

Why the Revision Matters

The original ISA 600 was often criticised for being overly focused on the size of components rather than the risks they posed. It also lacked clarity on how group auditors should interact with component auditors, especially in multinational engagements. The revised standard addresses these concerns by:

• Shifting the focus from “significant components” to risk of material misstatement.
• Strengthens requirements for robust two-way communication between the group and component auditor
• Enhances documentation requirements
• Emphasising the group engagement partner’s responsibility with regards to direction, supervision and review of the work of component auditors.
• Encouraging scalable and proportional application based on the complexity of the group.

‍

Key Principles of ISA 600 (Revised)

1. Risk-Based Approach

The revised standard is based on a risk-based framework. Group engagement teams are required to:

• Understand the group and its environment.
• Identify and assess risks of material misstatement at both the group and component levels to tailor audit procedures to respond to those risks effectively, and
• Greater focus on planning an appropriate approach to obtaining sufficient appropriate audit evidence

This approach ensures that audit efforts are concentrated where they matter most, rather than being diluted across components based solely on size or structure.

2. Integration of Component Auditors

Component auditors are now considered part of the engagement team, which means:

• The group auditor must direct, supervise, and review their work.
• There must be clear communication regarding ethical requirements, independence, and audit methodology.
• The group auditor retains ultimate responsibility for the audit opinion.

This integration fosters greater accountability and consistency across the audit process.

3. Enhanced Documentation and Communication

ISA 600 (Revised) places a strong emphasis on documentation. Group auditors must:

• Clearly document their understanding of the group structure and risks.
• Record how they evaluated the work of component auditors.
• Ensure that the audit file stands alone as a complete and coherent record.

Communication is also critical. The revised standard outlines expectations for two-way dialogue between group and component auditors, including discussions about risks, findings, and limitations.

4. Scalability and Proportionality

One of the most practical aspects of ISA 600 (Revised) is its scalability. Whether auditing a small group with a few components or a multinational corporation with dozens of subsidiaries, the standard allows for proportional application. This ensures that smaller firms and less complex audits are not overburdened, while still maintaining high standards of quality.

‍

Implementation Strategies for Group Engagement Teams

Successfully implementing ISA 600 (Revised) requires more than just reading the standard. It demands a strategic shift in how group audits are planned and executed. Here are some key strategies:

• Early Planning: Begin risk assessments and component evaluations early in the audit cycle to allow time for coordination and review.
• Training and Alignment: Ensure that all team members, including component auditors, are trained on the revised standard and aligned on methodology.
• Technology Utilisation: Use audit software and collaboration tools to streamline communication and documentation across jurisdictions.
• Quality Control: Establish robust internal review processes to ensure compliance with the standard and consistency in execution.

‍

Challenges and Considerations

While ISA 600 (Revised) offers many improvements, it also introduces challenges:

• Access to Information: In some jurisdictions, legal or regulatory barriers may limit access to component auditor workpapers.
• Cultural and Language Differences: Multinational audits may require additional effort to bridge communication gaps.
• Resource Allocation: Smaller firms may need to invest in training and infrastructure to meet the new requirements.

Addressing these challenges proactively will be key to successful implementation.

‍

Conclusion

ISA 600 (Revised) marks a pivotal evolution in group audit standards. By focusing on risk, enhancing oversight, and promoting integration, it empowers group engagement teams to deliver more effective and reliable audits. For firms willing to embrace the change, the revised standard offers an opportunity to elevate audit quality and reinforce trust in financial reporting.

As the effective date approaches, now is the time for group engagement teams to prepare, adapt, and lead the way in implementing this transformative standard.

‍

For authoritative guidance and a comprehensive interpretation of ISA 600 (Revised), readers are encouraged to consult the full text of the standard or seek specialist professional advice. Should you require further clarification or wish to discuss specific matters arising from its application, our team remains available to provide the necessary support.