ISA 600 (Revised): what changed for group audits
What the IAASB says ISA 600 (Revised) changed for group audits, when it took effect, and what a firm auditing small groups should do differently.
By Achekam · · 4 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
Many smaller practices think of group audits as something the large firms do. Yet a typical client book in Johannesburg, Lagos or Nairobi includes plenty of small groups: a holding company with a trading subsidiary and a property company, a family business with a branch across the border, a school trust that owns a separate catering company. Each of those consolidated statements is a group audit, and ISA 600 (Revised) applies to it.
The revised standard has been in effect for a while now, but many small-group files still look as they did before it. This article summarises what the IAASB says changed and turns it into practical steps for a firm whose groups are modest in size.
What ISA 600 (Revised) covers
ISA 600 (Revised), Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors), deals with the special considerations that apply to a group audit, including when component auditors are involved. Note the scope: it applies to group audits generally, not only where another firm audits a component. A group in which the same firm audits every entity is still a group audit.
The IAASB's publication page for ISA 600 (Revised) summarises the revision and gives access to the standard.
Alignment with ISQM 1, ISA 220 (Revised) and ISA 315 (Revised 2019)
The IAASB states that ISA 600 (Revised) includes new and revised requirements and application material that better align it with recently revised standards such as International Standard on Quality Management 1, ISA 220 (Revised) and ISA 315 (Revised 2019).
The practical message of that alignment is that a group audit is not a separate exercise with its own logic. The firm's system of quality management, the engagement partner's responsibility for the engagement, and the risk assessment approach all carry through to the group and its components. If a firm's group audit template still reads like a self-contained checklist bolted onto the parent's file, it is probably out of step with the standards it is now meant to align with.
Scepticism, planning, communication and documentation
The IAASB states that the new and revised requirements strengthen the auditor's responsibilities in four areas: professional scepticism, planning and performing a group audit, two-way communications between the group auditor and component auditors, and documentation.
For a small group, each area has a concrete meaning:
- Scepticism: intercompany balances, management charges and transfers between related entities deserve the same challenge as third-party transactions, not less because "it is all one family".
- Planning and performing: decide which components need work and what kind, based on the group's risks rather than on habit or on which subsidiary is largest.
- Two-way communication: where another firm audits a component, instructions out and findings back are both required, and both need to be on time. What group and component auditors must tell each other covers the detail.
- Documentation: the group file should show how scope was decided, what each component auditor was asked to do and how their work was evaluated.
When it applies, and what else changed
ISA 600 (Revised) is effective for audits of group financial statements for periods beginning on or after 15 December 2023, under the IAASB's dates. For most groups with ordinary year-ends, several audits have now been carried out under it. Confirm the local adoption position with your regulator if in doubt, but the more useful question today is whether last year's group files actually reflect the revised requirements, or only carry the new number on the cover.
Conforming amendments elsewhere
The IAASB issued ISA 600 (Revised) together with conforming and consequential amendments to other International Standards arising from it. That means the change is not confined to the group audit paper, and templates in other areas may also need updating. When reviewing the firm's methodology, follow the list of amendments into each affected template.
Group audit tools in Achekam
In Achekam, staff set up a group audit in the Group Audit Control Tower by recording each component with its scope, materiality and component auditors, and issue instructions from there. Each component auditor works through a portal link to acknowledge the instructions, upload deliverables and report misstatements. That structure suits the revised standard's emphasis on planning and two-way communication: scope and materiality are set per component, and acknowledgements and deliverables come back through the same route.
For working papers, Achekam ships template packs written in its own words, covering audit areas and other engagement types, for a firm to adopt and approve; they are marked as unapproved platform content until the firm adopts them. As with any template, check group audit papers against ISA 600 (Revised) before relying on them.
A small-group checklist
Before planning the next group audit, the engagement partner can work through these questions:
- Is this a group audit under ISA 600 (Revised), even though the firm audits every entity?
- Has the acceptance decision considered access to component information, people and auditors? See accepting a group audit.
- Has scope been set from the group's risks, and is the reasoning recorded? Group audit scoping explains how.
- Is component materiality set and recorded for each component that needs work?
- Where other firms are involved, have their co-operation, ethics and competence been considered, and are instructions specific about what to report back?
- Are intercompany transactions and balances tested for completeness and agreement on both sides?
- Will the group team review component work, and is that review recorded?
- Does the group file show how all of the above was done?
Small groups make it tempting to treat consolidation as arithmetic. The revised standard asks for an audit of the group, and a short checklist at planning is the easiest way to make sure the file shows one.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
