The Key Stages of a Group Audit
What is a group audit?
A group audit is an audit of consolidated financial statements for a corporate group that includes a parent company and its subsidiaries. It ensures that the financial information of all entities within the group is accurately combined and fairly presented.
Why are group audits important?
Group audits play a crucial role in ensuring reliable financial reporting and strong corporate governance. They help organisations maintain accuracy, transparency, and compliance across multiple entities.
How do group audits improve financial accuracy?
By reviewing financial data from all subsidiaries and the parent company, group audits reduce the risk of material misstatements and ensure consolidated financial statements reflect the group’s true financial position.
How do group audits enhance transparency?
Group audits provide stakeholders such as investors, lenders, and regulators with a clear and complete view of the group’s overall performance, rather than isolated entity-level results.
How do group audits support risk management?
They identify financial, operational, and compliance risks across all group entities, allowing management to address weaknesses early and implement stronger risk controls.
How do group audits help with regulatory compliance?
Group audits ensure that all entities comply with relevant accounting standards and legal requirements, reducing exposure to penalties, regulatory action, or reputational damage.
What are the main steps in a group audit process?
Planning
The group auditor (usually the parent company’s auditor) defines the audit scope, identifies entities involved, and develops the overall audit strategy.
Coordination
The group auditor works closely with component auditors to align timelines, audit procedures, and reporting requirements.
Risk Assessment
Key risks of material misstatement are assessed across the group, including reviews of internal controls at both parent and subsidiary levels.
Audit Execution
Component auditors perform audit work on subsidiaries based on guidance from the group auditor, who then reviews their findings for consistency and quality.
Consolidation
Financial results are consolidated, with intercompany balances and transactions eliminated to present an accurate group-wide picture.
Reporting
The group auditor issues an audit opinion on the consolidated financial statements, confirming compliance and reliability.
What challenges are commonly faced in group audits?
Group audits can be complex due to:
- Differences in business operations across subsidiaries
- Coordination across multiple auditors and locations
- Increased risk of errors due to group size
- Cultural and language differences affecting communication
Why are group audits especially relevant in Singapore?
Singapore is a major regional and global business hub, hosting many multinational groups. As a result, group audits are essential for maintaining strong governance and investor confidence.
Who regulates group audits in Singapore?
Audits in Singapore are regulated by the Accounting and Corporate Regulatory Authority (ACRA). Group audits must comply with Singapore Standards on Auditing (SSAs), which align closely with international auditing standards.
What should companies consider when conducting group audits in Singapore?
- Strict compliance with SSAs
- Strong understanding of local regulations in each subsidiary’s jurisdiction
- Clear and regular communication between group and component auditors
- Cultural awareness to support effective cross-border collaboration
What are the key benefits of group audits for Singapore-based businesses?
- Greater financial credibility with investors and stakeholders
- Better-quality information for strategic decision-making
- Stronger group-wide risk management
- Reduced risk of regulatory non-compliance