Topics to be covered

1. Topics to be covered • Group audit methodology and objectives • Determination of group audits • Determine group planning materiality and tolerable error • Subsequent event considerations • Communicating with component auditors

2. Group audit methodology • Statement on Auditing Standards, “Special Considerations – Audits of Group Financial Statements (Including the Work of Component Auditors” • Based on the performance requirements and guidance in ISA 600 • While ISA 600 does not provide the group auditor with the ability to make reference to the audit of the component auditor in the auditor’s report on the group financial statements, the SAS retained the ability to continue to make reference as described in the previous AICPA, professional standards • Effective for audits of group financial statements for periods ending on or after December 15, 2012

3. Group audit objectives • Address “aggregation risk” • Update professional standards with respect to the group auditor’s interactions with component auditors • When making reference to the component auditor • When not making reference to the component auditor

4. Determination of group audits • When is an audit a group audit? • Group audit is an audit of a group’s financial statements • A group always consists of two or more components • A component is an entity or business activity for which group or component management prepares financial information that should be included in the group financial statements • If the component is audited by an outside auditor, it is generally considered a component.

5. Determine group planning materiality and tolerable error • This is done at the respective opinion unit level • We would assign tolerable error to the various full and specific scope components, if any, in each opinion unit • Addresses aggregation risk with respect to the aggregation of financial information of components with respect to the affected opinion unit

6. Subsequent events • The group financial statements of many governmental entities may include separately prepared financial information that is based on the separately audited financial statements of certain components, many of which may also be audited by a non-EY component team • In order to facilitate the timely inclusion of these components in the group financial statements of the respective governmental entity, group management may request that the separately prepared and audited financial statements of the component be issued up to several weeks before the group financial statements are expected to be issued

7. Subsequent events (cont.) • The EY primary team auditing the group financial statements of the governmental entity will request the non-EY component team to perform procedures designed to identify events at the component that occur between the date of the financial information of the component and the date of the group auditor’s report on the group financial statements • We suggest you update subsequent events every two to three weeks in order to be able to comply with the CAFR filing deadline.

8. Subsequent events (cont.) • It is important that group management have a process to identify subsequent events at its components and take responsibility for identifying all subsequent events of the group, including its components • Inability of group management to properly address subsequent events of the group likely would result in a control deficiency

9. Communication with a component auditor • Request component auditor confirm that they will cooperate with group engagement team • Ethical requirements, including independence rules • Subsequent events • Peer review report and other communication, if this is a Government Auditing Standards audit