What is the group engagement team?
The group engagement team operates at the centre of the group audit. Under ISA 600 (Revised).16, the team must obtain an understanding of the group and its components (including their environments) sufficient to identify and assess the risks of material misstatement of the group financial statements. This understanding drives every scoping decision: which components need targeted procedures, what component materiality levels to set, which component auditors to involve, and what form the group audit instructions should take.
The team's responsibilities do not end at planning. ISA 600 (Revised).40 requires the team to communicate with component auditors throughout the engagement, not just by issuing instructions at the start. At completion, the team evaluates whether the work performed by component auditors, combined with work performed directly by the team on the consolidation, provides sufficient appropriate audit evidence for the group audit opinion. If gaps exist, the team requests additional work from the component auditors or performs additional procedures itself.
Key Points
- The group engagement team sits at the group auditor's firm, not at the component level.
- This team sets the group audit strategy and determines component materiality and scope for every component.
- Component auditors are not part of the group engagement team, even within the same network firm.
- The revised standard increased the team's responsibility for direct risk assessment across the entire group.
Worked example: Ferreira Logistics S.A.
Client: Portuguese logistics group, FY2024, consolidated revenue €60M, IFRS reporter, two operating subsidiaries in Portugal and one in Spain.
Establish the group audit strategy
The group engagement team (a partner and two seniors at the Lisbon office) identifies that revenue recognition across the three components is the primary risk area. The Spanish subsidiary accounts for 35% of consolidated revenue (€21M) and uses a separate accounting system from the two Portuguese entities.
Determine component materiality
The team sets group materiality at €600K (1% of revenue). Component materiality for the Spanish subsidiary is set at €360K (60% of group materiality). The two Portuguese subsidiaries share a combined component materiality of €420K (70% of group materiality) because the group engagement team performs the audit work on them directly.
Communicate with the Spanish component auditor
The team issues group audit instructions that specify the risk areas, component materiality, reporting deadlines, and the form of the component auditor's communication. The team holds a planning call with the component auditor to discuss the intercompany pricing risk.
Evaluate at completion
The team reviews the Spanish component auditor's report and identifies one unadjusted misstatement of €45K in intercompany revenue cut-off. The team aggregates it with group-level findings. Total unadjusted misstatements: €127K, below group materiality of €600K.
The group engagement team's documented involvement spans planning through completion, covering both the strategic decisions and the evaluation of component work. If the team had limited its role to issuing instructions without the planning call or the completion review, the file would not demonstrate sufficient involvement.
What reviewers and practitioners get wrong
Teams frequently treat the group engagement team's role as administrative rather than substantive. The instructions go out and the reports come back. The team files them without critical evaluation. ISA 600 (Revised).42 requires the group engagement team to evaluate whether the component auditor's work is adequate. Filing a report is not evaluating it.
On smaller group audits where the group engagement team also performs the work on most components, teams sometimes fail to distinguish between their role as group engagement team and their role as auditor of individual components. The documentation should make this distinction clear: the group-level risk assessment and the component materiality determination are group engagement team responsibilities, as are the consolidation procedures and the evaluation of component auditor reports. Mixing these with component-level work obscures the file structure.
Key standard references
- ISA 600 (Revised).14(i): Defines the group engagement team.
- ISA 600 (Revised).16: Requires the team to obtain an understanding of the group and its components.
- ISA 600 (Revised).30: Requires the team to determine component materiality.
- ISA 600 (Revised).40: Requires ongoing communication with component auditors.
- ISA 600 (Revised).42: Requires the team to evaluate whether component auditor work is adequate.
Related terms
Related reading
Frequently asked questions
Are component auditors part of the group engagement team?
No. ISA 600 (Revised) defines the group engagement team as the partner and staff at the group auditor's firm. Component auditors are not part of the group engagement team, even if they belong to the same network firm. They perform work under the team's direction but are separate.
What happens if the group engagement team does not evaluate component auditor work?
Filing a component auditor's report is not the same as evaluating it. ISA 600 (Revised).42 requires the group engagement team to evaluate whether the component auditor's work is adequate. Without that evaluation, the group audit file lacks evidence that the team exercised the judgment the standard requires.