Audits of consolidated financial statements: New requirements due to ISA 600

Group-wide audit team

The Main Tech­ni­cal Com­mit­tee (Haupt­fach­aussschuss - HFA) of the In­sti­tut der Wirt­schaftsprüfer in Deutsch­land e. V. (IDW) has ad­op­ted a mo­di­fied ver­sion of ISA 600 (Re­vi­sed) to in­clude na­tio­nal par­ti­cu­la­ri­ties un­der the title "Spe­cial con­side­ra­ti­ons - au­dits of con­so­li­da­ted fi­nan­cial state­ments (in­clu­ding the ac­tivi­ties of com­po­nent au­di­tors)".

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One of the key chan­ges to ISA 600 (Re­vi­sed) con­cerns the con­cept of a group-wide au­dit team. Ac­cor­ding to this, a joint team is to act to au­dit the con­so­li­da­ted fi­nan­cial state­ments, which strengt­hens the in­vol­ve­ment and re­spon­si­bi­lity of the group au­di­tor. The group au­di­tor is now fully re­spon­si­ble for the ma­nage­ment and qua­lity of the ent­ire group au­dit. Even if au­dit pro­ce­du­res for group com­pa­nies or sub-areas are per­for­med by other au­di­tors, the main re­spon­si­bi­lity re­mains with the group au­di­tor. An amen­ded de­fi­ni­tion of "sub-area" enab­les a more fle­xi­ble deli­mi­ta­tion of the sub-areas for au­dit plan­ning and exe­cu­tion.

The chan­ges have an im­port­ant im­pact on risk as­sess­ment, coope­ra­tion with di­vi­sio­nal au­di­tors, and do­cu­men­ta­tion re­qui­re­ments. The ex­ten­ded scope of re­spon­si­bi­lity of the group au­di­tor me­ans that the au­di­tor is more in­vol­ved at both the group and sub-di­vi­sio­nal le­vels.

Extended risk assessment

One fo­cus of ISA 600 (Re­vi­sed) is on an ex­ten­ded risk as­sess­ment. The group au­di­tor is the­re­fore re­spon­si­ble for gai­ning a suf­fi­ci­ent un­der­stan­ding of the mea­ning of ISA [EN] 315 (Re­vi­sed 2019) as the ba­sis for the risk as­sess­ment. They are also re­spon­si­ble for iden­ti­fy­ing and as­ses­sing the risks of ma­te­rial mis­state­ment in the con­so­li­da­ted fi­nan­cial state­ments, in­clu­ding the con­so­li­da­tion pro­cess. Its risk as­sess­ments the­re­fore re­late in­iti­ally to the le­vel of in­di­vi­dual items in the con­so­li­da­ted fi­nan­cial state­ments and sub­se­quently to the le­vel of in­di­vi­dual sub-areas.

Con­se­quently, the stan­dard places more em­pha­sis on the iden­ti­fi­ca­tion and as­sess­ment of risks and the re­sponse of the group au­di­tor ba­sed on this. This is in­ten­ded to im­prove au­dit qua­lity in the in­te­rests of all sta­ke­hol­ders and to fo­cus spe­ci­fi­cally on re­le­vant risks. The group au­di­tor should carry out a de­tai­led risk as­sess­ment at the group le­vel and pro­vide com­pre­hen­sive gui­dance to the com­po­nent au­di­tor to ef­fec­tively im­ple­ment the au­dit stra­tegy and au­dit plan.

Cooperation with the sub-area auditors

In ad­di­tion, the group au­di­tor must be ac­tively in­vol­ved in the plan­ning and exe­cu­tion of the com­po­nent au­dits to en­sure that all au­dit ac­tivi­ties com­ply with the re­qui­re­ments of the re­vi­sed au­diting stan­dard. Ac­cor­din­gly, in­crea­sed com­mu­ni­ca­tion and coor­di­na­tion bet­ween the group au­di­tor and the com­po­nent au­di­tors is re­qui­red to en­sure an ef­fec­tive ex­change of in­for­ma­tion and to align the com­po­nent au­dits with the over­all stra­tegy and plan of the group au­dit.

Extended documentation requirements

The ex­ten­ded do­cu­men­ta­tion re­qui­re­ments un­der ISA 600 (Re­vi­sed) ent­ail an in­crea­sed workload. They are ai­med at en­su­ring the qua­lity and tra­ce­abi­lity of the au­dits per­for­med. More ex­ten­sive and de­tai­led do­cu­men­ta­tion is re­qui­red to en­sure that the au­dit is tra­ce­able at all ti­mes and ful­fills high-qua­lity stan­dards.

First-time application

ISA [EN] 600 (Re­vi­sed) ap­plies for the first time to the au­dit of fi­nan­cial state­ments for pe­riods be­gin­ning on or af­ter 15 De­cem­ber 2024, i. e. for the first time for the fi­nan­cial year 2025. Volun­tary early ap­pli­ca­tion for pe­riods be­gin­ning on or af­ter 15 De­cem­ber 2023, i. e. for the first time for the fi­nan­cial year 2024, is per­mit­ted.

Conclusion

The re­vi­sed ver­sion of ISA 600 ent­ails si­gni­fi­cant chan­ges that are in­ten­ded to strengt­hen the role of the group au­di­tor and im­prove the over­all qua­lity of the au­dit. With a stron­ger fo­cus on risk as­sess­ment and com­mu­ni­ca­tion as well as ex­ten­ded do­cu­men­ta­tion re­qui­re­ments, the im­ple­men­ta­tion of the new re­gu­la­ti­ons will re­pre­sent a chal­len­ging but ne­cessary de­ve­lop­ment for the prac­tice of au­diting con­so­li­da­ted fi­nan­cial state­ments. This will re­quire even clo­ser coor­di­na­tion bet­ween the group au­di­tor and the di­vi­sio­nal au­di­tors in the fu­ture. In the case of in­ter­na­tio­nal group struc­tures, this re­qui­re­ment can be co­vered by a glo­bally more in­te­gra­ted net­work, which is cha­rac­te­ri­sed by uni­form pro­ces­ses, stan­dards, and in­stru­ments. In ad­di­tion to uni­form qua­lity stan­dards world­wide, RSM has a uni­form Glo­bal Au­dit Me­tho­do­logy (GAM), uni­form pro­ces­ses, and au­dit tools and thus ful­fills the ex­ten­ded re­qui­re­ments. This is a de­cisive ad­van­tage when it co­mes to sup­por­ting in­ter­na­tio­nally or­ga­nised groups of com­pa­nies.

Ju­lian Breidthardt, Tor­ben Roh­land