Definition
A group audit is an audit of group financial statements, which include financial information of more than one entity or business unit, such as a consolidated set of financial statements. AU-C 600 was revised by SAS 149 and applies to audits for periods ending on or after December 15, 2026. It applies a risk-based approach to the group.
Why it matters in an audit or review
The group team identifies and assesses risks of material misstatement for the group as a whole, determines which components need work and how much, and sets component performance materiality. It can do the work itself, direct component auditors, or perform analytics for components that are not significant. The group engagement partner has overall responsibility and cannot shift it to a component auditor.
Example
A holding company has seven subsidiaries. Two together make up 70 percent of consolidated revenue (illustrative). The group team does full audits of those two, targeted procedures on one with a specific risk (a large lease), and group-level analytics on the remaining four. Group materiality is $1 million, and the team sets lower materiality for the components it works on.
Common mistakes
Treating a group audit as the sum of component audits. The group team has to evaluate the combined effect of misstatements and the consolidation process.
Sources
- AICPA, AU-C Section 600, Special Considerations-Audits of Group Financial Statements (Including the Work of Component Auditors) (as revised by SAS 149), effective for audits of group financial statements for periods ending on or after December 15, 2026
- Journal of Accountancy, New standard provides risk-based approach to group audits (March 2023): https://www.journalofaccountancy.com/news/2023/mar/new-standard-provides-risk-based-approach-group-audits.html
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error