The revised SA 600 (Standard on Auditing 600), aligned with the IAASB's ISA 600 (Revised), introduces significantly more demanding requirements for group audits — including how a group auditor supervises and reviews component auditors. For Indian CA firms that serve as either group auditors or component auditors in a group structure, the changes have practical implications for engagement planning, documentation, and reporting.
What Changed in the Revised SA 600
| Aspect | Previous SA 600 | Revised SA 600 |
|---|---|---|
| Scope of group audit | Applied to significant components only | Applies to all components; even insignificant ones require consideration |
| Group auditor responsibility | Responsibility could be shared with component auditor | Group auditor bears sole responsibility for the group audit opinion |
| Component auditor instructions | Brief instruction letter was sufficient | Detailed engagement instruction letter with specific risk, materiality, and procedure instructions required |
| Review of component work | Review of component audit reports | Active review of component auditor's working papers; evaluation of audit quality |
| Communication | Limited formal communication requirements | Structured, documented two-way communication throughout the audit |
| Materiality for components | Group-level materiality often applied to components | Separate component performance materiality must be determined (lower than group) |
Who Is Affected
Group Auditors (Signing the Consolidated Audit Report)
If your firm signs the consolidated financial statement audit for a group with subsidiaries, you are the group auditor. Key new obligations:
- Issue detailed engagement instructions to every component auditor (for each subsidiary where another CA firm audits)
- Evaluate whether the component auditor has the competence and resources for the work
- Review component working papers — not just the final audit report
- Maintain documentation of the entire communication process with component auditors
- Take responsibility in your own audit report for the completeness and quality of the group audit
Component Auditors (Auditing a Subsidiary of a Listed Group)
If your firm audits a subsidiary where the parent company has a different group auditor:
- Expect to receive a detailed instruction letter specifying materiality levels, risk areas, and reporting requirements
- Your working papers may be reviewed by the group auditor or their designee
- You must respond to group auditor queries and provide access to working papers
- A new "component auditor representation" may be requested by the group auditor
Practical Changes to Audit Planning
Group Materiality Cascade
Under the revised SA 600, a group with multiple components requires:
- Group performance materiality (say 5% of PBT)
- Component materiality (lower — typically 50–75% of group materiality)
- Threshold for trivial errors at the component level
This means component auditors will be working to stricter thresholds than group-level materiality — requiring more detailed testing for each subsidiary.
Documentation Requirements
- Engagement instruction letter to each component auditor (saved in group audit file)
- Assessment of each component auditor's independence, competence, and quality
- Review of component auditor's responses to instructions
- Notes from any discussions with component auditors
- Consolidation working papers linking component results to group financials
Implementation Timeline for Indian CA Firms
ICAI typically applies revised SAs to audits for reporting periods beginning on or after a specified date. CA firms should:
- Check the ICAI notification for the effective date of the revised SA 600
- Update their internal audit methodology for group audits
- Train audit teams on the new documentation requirements
- Update the standard engagement instruction letter used for components
- Add component auditor assessment to the engagement acceptance procedure
TaxZeo tracks UDIN generation, peer review compliance, and documentation status for every audit engagement — keeping your quality control records audit-ready throughout the year.
Start Free TrialFrequently Asked Questions
If a CA firm audits only the subsidiary (not the group), do we need to change anything?
Yes. As a component auditor, you will receive much more detailed instructions from the group auditor, and your working papers may be reviewed. You need to: (a) be prepared to provide the group auditor access to your working papers or a detailed summary; (b) understand the component materiality set by the group auditor (which will be lower than what you might otherwise use); (c) respond formally to the instruction letter and confirm compliance with the specified procedures. The revised SA 600 significantly increases the group auditor's oversight of component work — so even if you are "just the subsidiary auditor," your engagement process will be more structured.