Component auditor (all you need to know)


The component auditor is the one who works on the financial information of the component. In simple words, the component auditor performs the audit on the financial information of a component company of the group audit, which is used as audit evidence when making opinion on the consolidated financial statement. So, component auditors, as the name suggests, are responsible for auditing Component Companies of the group.

The audited financial information of the component company is used as evidence in the group audit. Hence, group auditor needs to consider the competence and independence of the component auditor as they need to rely on the work performed by them.

To know it more precisely,

The component company is part of group business structure for which financial information is prepared. This financial information is then further reported in the group financial statements.

Detailed understanding for component auditor and group audit:

The component auditor may be involved in work on evaluating the materiality of group financial statements. They can also perform additional tasks of subsequent auditing components. The component auditor and group auditor are related to each other in a way that the information gathered by a component auditor is further used for the group audit.

The group engagement team is responsible for checking the materiality of auditing performance at the component level. All the work is subsequently done by the group auditor who works on the financial information provided by the component auditors. The group auditor performs the overall direction and supervision of the group audit.

So ultimately, it becomes the responsibility of the group auditor to assess the materiality of performance and what are the risks associated with it. For that matter, there are certain tasks that the group auditor has to perform for component auditors.

Further, the group auditor specifies the work that auditor will need to perform as they are expected to have more understanding at the group level. Moreover, they can also perform additional procedures with the component auditor that are helpful to improve the overall audit process.

Work assigned to component auditors:

The work assigned to the component auditor is first properly assessed to determine risks of material misstatement associated with the component. After assessing and reviewing the risks, the work is assigned to the component auditor to perform an audit that has the potential to affect the group’s financial statements. 

The component auditor can perform an audit of different account balances keeping in mind their relevance with the risk.

Factors to consider for assessing component auditor:

There can be several factors that affect the work of a component auditors. These factors include the work experience of the auditor, their market reputation, the resources available to them for performing the audit, etc. All these are the important aspects to consider for relying on the work .

Reporting structure and component auditor

In the group of companies, different companies need to be audited individually. Once an audit is completed at individual levels, the financial information of the components is consolidated with the main company to prepare consolidated financial information. Shareholders and other stakeholders are mainly interested in the consolidated financial statement as it provides performance assessment for the overall group.

The companies in the group structure are called components of the group. These companies appoint their auditors to perform auditing procedures. These companies are called components, and their auditors are called component auditors.

Components auditors issue audit reports on the truth and fairness of financial statements. The group auditors rely on work performed by component auditors to form an opinion on the consolidated financial statement.

Hence, the component auditors makes opinions and issues report on the component company. On the other hand, group auditors make opinions and issue reports on the consolidated financial statement.

More reading on, tothefinance 

Group reporting

Component auditors need to report important auditing information to the group auditor. The information includes but is not limited to the following.

  1. Risk assessment techniques – How component auditors has assessed risk of material misstatement.
  2. Materiality calculation – How materiality was determined and what was the basis for the same. Group auditor can help determine materiality.
  3. Assurance – It’s about how assurance was obtained on the identified risk of material misstatement.
  4. Independence and audit team details – A disclosure that there is no personal interest of any team member in the business operations of the audit client.
  5. Key audit matters – Key audit matters include important events with significant impact.


Component auditors play an integral part in the entire auditing process. Whether it’s’ about collecting evidence or making an opinion, the group auditors need to rely on the work performed by the component auditor. Hence, the group auditor needs to assess the independence and competence of the before relying on their work.

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