During the scope of the audit, there might be circumstances which require external work to be carried out by the company, predominantly on grounds of ensuring that the overall scope and understanding of the audit is able to reflect the audit work, which can provide reasonable estimation pertaining to the underlying quality of the financial statements.

In this regard, it can be seen that the auditor who performs work on the financial information of a component that is used as audit evidence is used predominantly for the group audit.

A component auditor in this regard might be part of the group audit engagement team, who might be located in a different location, network firm, or any other geographic location for that matter.

The objective of the Component Auditor

The component auditor is mainly hired with the objective to evaluate and subsequently determine materiality for the group financial statements. Additionally, they are also contracted to work on the subsequent components that need to be audited and reviewed.

This information is put forth by the component auditor and based on these findings, the group auditor is able to determine group materiality and other financial statements.

Scope of the Component Auditor

The group engagement team is required to evaluate the underlying appropriateness of the performance materiality that exists at the component level, which is subsequently determined by the group auditor himself.

Therefore, it then becomes the responsibility of the group auditor to ensure that he is able to design and subsequently implement audit tests that can address the underlying identified risks of material misstatements that exist in the group financial statements. This is mostly done using the analysis and the report that is put forth by the group auditor.

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However, it must be recognized that in order to assume the responsibility undertaken by the component auditor, the group auditor is required to take care of a number of things. Firstly, he needs to ensure that he has properly specified the work that is performed by the component auditor.

Additionally, he also needs to factor in that he is involved in the component auditors’ work by performing additional procedures that might be helpful for the overall scope of the audit process.

Determination of the work performed on components

The type of work that is mostly undertaken when it comes to the component auditor is prescribed after a thorough review of the assessed risk about a certain component which has an underlying capacity to generate a material misstatement in the group financial statements should be highly significant because of the fact that

Therefore, the components that are duly identified should be highly significant owing to the fact that in individual capacity, they have the potential to strongly impact the independent financial results of the group, the group engagement team, or the component auditor on its behalf.

Hence, it calls for performing an audit of that particular component’s financial information, which is subsequently adapted to be highly necessary when it comes to meeting the group team engagement needs pertaining to the audit process itself.

Therefore, after the work has been determined based on materiality of the component itself, the component auditor is then supposed to audit the financial information, which is adapted in order to tune in to the group engagement needs.

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Alternatively, the component auditor also has the option to conduct an audit for one or more account balances, or classes of transactions. This can also include subsequent disclosures that are made pertaining to the inherent risks of material misstatement of the group financial statements.

On the other hand, for the components that are not determined to be significant, an alternate course of action can be to perform analytical procedures. Based on the results obtained, the relevant course of action can then be taken about disclosure, as well as dealing with this particular issue at hand.


Component Auditor can therefore be seen as an integral part of the overall audit process because of the high degree of significance it brings in to the overall process.

As a matter of fact, it becomes increasingly important to realize the fact that component auditor can only be used under special circumstances, and under those circumstances, it also becomes necessary to account for factors that are material, as to have the potential to impact the final results either in the financial statements, or the audit opinion that is put forth after consideration of the group related financial performance.