Referred-to Auditor and a Component Auditor

Introduction

In group audits, where multiple entities are consolidated into one set of financial statements, the group auditor may engage or rely on other auditors. Two common roles in this setting are the referred-to auditor and the component auditor. Though both contribute to the overall audit, their involvement and how their work is represented in the audit report differ.

Who is a Referred-to Auditor?

A referred-to auditor is explicitly mentioned in the group audit report. This typically occurs when the group auditor chooses not to take full responsibility for the component’s audit and instead references the work of another independent auditor. The referred-to auditor’s name, the scope of their audit, and their audit opinion are disclosed directly in the group auditor’s report. This approach is governed by auditing standards like ISA 600 and typically applies when the group auditor cannot or does not review the component auditor's work in detail.

Key Characteristics:

• Named in the audit report
• Group auditor does not take full responsibility
• Used when the component auditor's work is relied upon independently

Who is a Component Auditor?

A component auditor, on the other hand, is involved under the direction of the group auditor. Their audit work is part of the overall audit plan, and the group auditor remains responsible for the final audit opinion. The group auditor supervises, reviews, and may test the component auditor’s work. Unlike a referred-to auditor, the component auditor is not named in the final report.

Key Characteristics:

• Not named in the audit report
• Group auditor takes full responsibility
• Their work is integrated and supervised

Conclusion

While both referred-to and component auditors contribute to group audits, the critical difference lies in how their work is presented and who assumes responsibility. A referred-to auditor is independently cited in the audit report, whereas a component auditor works under the group auditor’s supervision and is not mentioned by name. Understanding this distinction helps clarify how audit conclusions are reached and disclosed.