UK Deloitte Audit and Its Implications on International Audits
The audit of a company by Deloitte in the UK does not necessarily mean it will also be audited by the same firm in other countries. This article explores the nuances of group audits, statutory reporting requirements, and the implications for companies operating internationally.
Understanding the Group Audit
A group audit involves separate audits for entities within a corporate group, such as the ultimate parent company and its direct and indirect subsidiaries. These separate audits are subject to country-specific statutory reporting requirements. While the overarching group “consolidated entity” audit may be handled by a single auditing firm, such as Deloitte, the individual audits of each component entity are conducted by local external auditors.
Role of Local Auditors
It is ultimately up to the board of directors of each component entity to elect or appoint local external auditors. Generally, the auditing firm responsible for the consolidated entity is also the one that provides instructions to the local auditors. These instructions can ensure consistency and compliance with the consolidated audit requirements.
The Role of Deloitte
While it would be ideal for the same auditing firm to audit all entities in a group, logistical and fee negotiation factors often prevent this. Deloitte, being a member of the Big 4, is frequently appointed as the lead auditor for the consolidated entity. In this role, they provide group audit instructions to the local auditors of each significant component entity. These instructions serve to standardize the reporting and ensure that the overall group financial statements are consistent and accurate.
International Reporting Requirements
For companies with subsidiaries in different countries, Deloitte, as the consolidated auditor, collects uniform customized reports from each significant subsidiary. These reports contain local country financial statement balances, expressed in local currency and/or translated into the ultimate parent company’s functional currency. Additionally, they include footnote amounts and narrative disclosures, which are crucial for the overall group report.
Service Coordination and Flexibility
Deloitte’s ability to perform these audits across multiple jurisdictions is contingent on the needs and agreements of the client. The audit scope and services can vary based on the Statement of Work (SOW) agreed upon by the client and Deloitte. This means that even if Deloitte audits a UK-based entity, it may not automatically extend to international subsidiaries. Each country and each subsidiary may have specific requirements that need to be addressed separately.
In conclusion, while the audit of a UK-based entity by Deloitte implies expertise in that region, it does not ensure a cross-border audit arrangement. The decision to extend the audit across international subsidiaries depends on various factors, including local regulations, client preferences, and the negotiated terms of engagement.