What is Component performance materiality?
In short
In a group audit, the group auditor sets component performance materiality for work on each component lower than group materiality, to reduce the risk that misstatements across components add up to a material amount.
Key takeaways
- Different components can have different amounts.
- The group auditor also sets a threshold above which misstatements are reported back.
- Component auditors use the amount the group auditor sets.
Where it's tested
AUD: Group Audits & Using Others' Work — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A group auditor decides to make reference to a component auditor who audited a significant subsidiary. What is the effect on the auditor's report?