Who is a Component Auditor? (Explained)


During the scope of the audit, there might be circumstances that require external work to be carried out by the company, predominantly on the grounds of ensuring that the overall scope and understanding of the audit can reflect the audit work, which can provide reasonable estimation about 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 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 the auditor responsible for auditing the component’s financial statements including the subsidiary, associate, or investments, which are part of the consolidated financial statements that the group auditor is auditing.

The main objective of the component auditor is to express their opinion on the financial statements being audited whether it is prepared, following the financial reporting standards.

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 the group auditor himself subsequently determines.

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 the group auditor puts forth.

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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 component auditor’s work.

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 to meet the group team engagement needs pertaining to the audit process itself.

Therefore, after the work has been determined based on the 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.

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 about the inherent risks of material misstatement of the group’s financial statements.

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On the other hand, an alternate course of action can be to perform analytical procedures for the components that are not determined to be significant.

Based on the results obtained, the relevant course of action can be taken regarding disclosure and dealing with this particular issue.


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

As a matter of fact, it becomes increasingly important to realize the fact that component auditors 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.