What does ISA 600 bring us?

ISA 600 (Revised) will take effect on December 15, 2023, impacting audits for 2024. We want to highlight that the standard has not been translated in our country; however, it is crucial to begin preparations now in light of the significant changes ahead.

The key aspects are:

1. Scope and Risk Assessment: The notion of “significant” components is being eliminated; instead, risk assessment will focus on risk itself. It is crucial to determine which components necessitate an audit.
2. Team Engagement: Component auditors will be integrated into the group audit team, which means the group auditor will be responsible for the quality of their work. Enhanced communication with component auditors will be crucial to ensure quality and competence.
3. Financial Implications: An increase in audit fees is anticipated due to the additional work and documentation required. Clients should be made aware of any potential changes.

KEY EFFECTS RELATE TO:

1. Proactive, risk-oriented approach at the group level
2. Group-level focus on:
   identifying and evaluating the risk of material misstatement,
   • planning the audit strategy, and
   • carrying out engagement procedures designed to address these risks.
3. Removal of the concept of financially significant components
4. Assessment of the risk of material misstatement at the assertion level of group financial statements rather than depending on the notion of financially substantial components.
5. Component auditors are now incorporated into the definition of the engagement team.

The following is necessary:

• prompt two-way communication between group auditors and component auditors;
• engagement of component auditors in the planning phase;
• ensuring that component auditors are free from ethical or independence conflicts;
• verifying that component auditors have sufficient competence and
• guiding, monitoring, and reviewing the work performed by component auditors.

COMPONENT AUDITORS

As the group auditor, you may require component auditors to undertake tasks that differ in scope and nature from what they would typically plan for a local statutory audit, and this work may operate under a completely different timeline. Clear and proactive communication with the component auditor and the client is crucial.

IMPACT ON FEES

The implementation of ISA 600 (Revised) is designed to affect audit fees significantly. Due to increased requirements for work and documentation, a general fee increase of at least 10% is expected for most audits. At the same time, certain cases may experience an even higher rise depending on the extent of the work.

NECESSARY ACTIONS

Scope
Conducting a comprehensive review of the scope for each group audit is vital; this will be crucial for enabling important discussions with clients and establishing the required audit procedures.

Communication
If you have not yet done so, promptly arranging discussions with your clients and component auditors is imperative.