You are the group auditor for an Indian parent with subsidiaries in the UAE audited by another firm. How do you plan and run the group audit?
What the interviewer wants to hear
- Understands the group, components and consolidation process
- Sets group and component materiality
- Assesses component auditors’ competence, independence and regulatory environment
- Sends instructions and reviews their work and reporting
- Audits consolidation, eliminations and GAAP differences
Model answer
Under SA 600 I am responsible for the group opinion, so I start by understanding the group structure, which components are significant by size or risk, and how consolidation is done. I set group materiality and lower component materiality for each component. For the UAE subsidiaries, I evaluate the component auditor’s competence, independence and whether they work to ISA, which is aligned with SA. I send detailed instructions covering the risks I want addressed, materiality, reporting deadlines and what they must report back, such as identified misstatements and control issues. I stay involved through calls, reviewing their key working papers, especially on significant risks, and their final reporting. At group level, I audit the consolidation itself: alignment of IFRS figures to Ind AS, foreign currency translation of AED balances, intercompany eliminations, unrealised profit and goodwill. Finally, I evaluate whether the evidence from all components is sufficient for the group opinion.
Can you answer it under time pressure?
Take a timed hard round and get scored on every answer.
More hard Auditor questions
- A client has made losses for three years and has a large loan repayment due in six months. How do you assess going concern?
- During the audit you find signs that a senior manager may be diverting payments to a vendor he controls. What do you do?
- Management refuses to book an audit adjustment you believe is material. How do you handle it?
- How would you audit management’s expected credit loss provision on trade receivables?
- The client runs on an ERP system. How do IT general controls affect your audit approach?
- Related party transactions are a significant risk at a family-owned listed company. How would you audit them?
- The client’s CFO pressures you to sign the audit report today, but key evidence on a large provision is still pending. What do you do?
- How have you used, or would you use, data analytics to improve audit quality?
- Besides the main opinion, Indian statutory auditors report under CARO 2020 and on internal financial controls. How do you build this into the audit?