Side-by-side comparison
| Dimension | Full scope | Specified procedures | Analytical procedures |
|---|---|---|---|
| What it covers | Complete audit of the component's financial information | Audit of specific account balances, transaction classes, or disclosures | High-level comparison of component data to group expectations |
| When assigned | Individually significant components or components with pervasive risk | Components with specific significant risks in certain areas | Non-significant components with no individually identified risks |
| Who performs it | Component auditor (or group team directly) | Component auditor (or group team) on directed areas only | Group engagement team at group level |
| What it produces | Full set of component audit evidence covering all assertions | Evidence on targeted areas only | Corroborative evidence with limited assurance on component totals |
| Typical trigger | Component exceeds 15–20% of a group benchmark | A specific risk exists (e.g., complex provision) but the component is not individually significant overall | Component contributes a small percentage with routine transactions |
Key Points
- Full scope covers an entire set of financial statements at the component; specified procedures target selected account balances or risks only.
- Analytical procedures at group level provide the least evidence and suit components with no individually significant risks.
- The choice between work types is driven by both financial significance and identified risks, not size alone.
- Misclassifying a component's work type is a frequent inspection finding because it directly affects evidence sufficiency at group level.
When the distinction matters on an engagement
The distinction becomes consequential when the group engagement partner evaluates whether enough evidence exists to support the group opinion. ISA 600 (Revised) requires the group team to obtain sufficient appropriate audit evidence on which to base the group opinion. If a component with a complex warranty provision receives only analytical procedures at group level, the group team has no direct evidence on that provision. A high-level comparison of warranty expense to revenue will not detect a €2M under-accrual buried in a €40M revenue subsidiary.
The classification also affects what the group engagement partner communicates to the component auditor. A full scope instruction covers the entire financial statements. A specified procedures instruction must define exactly which balances, risks, assertions, and thresholds to apply. Vague instructions produce vague evidence. Inspection findings consistently flag this gap.
Worked example: Fabbrica Moderna Group S.p.A.
Client: Italian manufacturing group, FY2024, consolidated revenue €210M, IFRS reporter. Five subsidiaries: Italy (parent and manufacturing), Germany (sales), Romania (production), Switzerland (treasury), and the Netherlands (holding and IP).
Full scope: Italy (parent)
The parent company generates €109M of the group's revenue and holds the majority of PPE, inventory, trade receivables, and intercompany balances. The group engagement team assigns a full scope audit. The component auditor conducts a complete audit at €525K component materiality.
Full scope: Germany (sales)
Revenue of €55M (26% of group) exceeds the significance threshold. Operations are straightforward (distribution only, no manufacturing) but the volume justifies a full scope audit. Component materiality set at €525K.
Specified procedures: Switzerland (treasury)
Revenue is only €8.4M, but the subsidiary manages the group's hedging programme. The group engagement team assigns specified procedures: test the fair value measurement of all derivative instruments, verify hedge documentation against IFRS 9 requirements, confirm bank balances, and reconcile intercompany treasury positions. No full scope audit is needed because the remaining balances (trade payables, salaries) are immaterial at group level.
Analytical procedures: Romania and the Netherlands
Romania (production, €27M revenue) has straightforward cost-plus intercompany transactions. The Netherlands (holding, €10.6M) consists primarily of IP licence income from intercompany agreements. Neither component has individually significant risks. The group engagement team performs analytical procedures centrally: compare current-year revenues and margins to prior year and to budget, verify that intercompany balances eliminate against corresponding group entries, assess whether the component's financial data is consistent with the group team's understanding of operations, and investigate any deviations above the clearly trivial threshold.
Why classification matters
If the group team had incorrectly assigned Switzerland analytical procedures instead of specified procedures, the derivative fair value measurements would not have been tested directly. That single misclassification would have left a known-risk area with no targeted evidence and the group opinion unsupported.
What reviewers and practitioners get wrong
The FRC's group audit thematic review identified that group engagement teams frequently assigned specified procedures without specifying them in enough detail for the component auditor to execute. "Test revenue" is not a specified procedure. "Select a sample of 25 revenue transactions above €50K and test to delivery documentation, customer contract, invoice, and cash receipt" is. ISA 600 (Revised) requires the group engagement team to determine and communicate the specific nature and extent of the work.
Teams also default to analytical procedures for every non-significant component without considering whether specific risks at those components warrant targeted work. A component contributing 6% of group revenue but holding a complex legal provision is under-scoped at the analytical level. The scoping decision must respond to identified risk, not just financial size.
Key standard references
- ISA 600 (Revised) paragraphs 29–38: Requirements for determining work types and the group engagement team's involvement in component auditor work.
- ISA 600 (Revised) paragraph 29: Requirement to consider both financial significance and identified risks when scoping components.
Related terms
Related reading
Frequently asked questions
What determines whether a component gets a full scope audit or specified procedures?
The decision is driven by both financial significance and identified risks, not size alone. A component exceeding 15-20% of a group benchmark typically triggers full scope. A component with a specific significant risk (such as a complex provision) but no pervasive significance receives specified procedures on that targeted area.
Can analytical procedures at group level miss material misstatements?
Yes. Analytical procedures provide corroborative evidence with limited assurance on component totals. A high-level comparison of revenue to prior year will not detect a material under-accrual buried in a subsidiary's accounts. If a component has a known risk area, analytical procedures alone are insufficient and specified procedures or full scope work is required.