Group Audit Independence Requirements

The International Standards on Auditing (ISA) 600 "Special Considerations – Audits of Group Financial Statements (Including the Work of Component Auditors)" requires the group engagement team to obtain understanding whether a component auditor comply with the ethical requirements that are relevant to the group audit and in particular, is independent.

The International Ethics Standards Board for Accountants (IESBA) of the International Federation of Accountants (IFAC) recognises that many regulators and other authorities may exercise their authority in relation to auditor independence requirement, particularly in situation where the national independence standards in the jurisdiction of the parent auditor contain requirements that are more stringent than those contained in the IFAC Code of Ethics (IFAC Code).

The Ethics Standards Board (ESB) of the Institute acknowledges the challenge to require foreign component auditors to adhere to some requirements contain in the MIA By-Laws which are more stringent than the IFAC Code. Arising from its deliberation, the Council of the Institute has concurred with the ESB position to allow foreign component auditors (whether a network firm or another firm) who are involved in the audit of the group financial statements to comply, at a minimum, with the IFAC Code.

The Council takes note that this practice is also consistent with those adopted in other jurisdictions such as the United Kingdom and the United States of America.

Source : MIA (http://www.mia.org.my/new/1_tech_detail.asp?tid=6&rid=5&id=930)