Group audit
Group audit
Assurance over group accounting, subsidiaries and the whole reporting chain
A group audit does not assess only the parent company's financial statements or individual subsidiaries. The subject of the audit is the whole that forms the consolidated financial statements: the group structure, the consolidation process, intra-group transactions, eliminations, reporting policies, and the reliability of the financial information obtained from the various companies.
A well-planned group audit combines the audit of the parent company, the subsidiaries and group accounting into a coherent process. It helps identify risks at the right level, reduces duplicated requests for documentation, and supports a predictable consolidated financial statements process.
We serve Finnish groups whose parent company prepares consolidated financial statements under the Finnish financial reporting framework or under IFRS. The audit can be carried out in full by our own team or in cooperation with the auditors of other subsidiaries.
This service concerns in particular a group headed by a Finnish parent company and its consolidated financial statements. The local audit of a Finnish subsidiary or other Finnish unit belonging to a foreign group is covered by a separate service. See the service for the Finnish unit of a foreign group.This page has not been published in English yet; the link takes you to the equivalent Finnish section of the site.
One audit view of the entire group
Proactive audit model
A proactive group audit supports a smooth financial statements process
The material group-level questions are best resolved before the final weeks of the reporting process
It is not appropriate to begin a group audit only once the consolidated financial statements are complete.
Planning carried out during the financial year helps identify questions relating to the group structure, acquisitions, reporting packages, intra-group balances and component audits well in advance.
This allows the group's finance management, the subsidiaries and the auditors to align responsibilities, information requests and timetables within the same process.
What can be done already during the financial year?
Structure, risks and transactions
- mapping the group structure and the preliminary audit scope
- identifying the risks and components that are material to the consolidated financial statements
- reviewing acquisitions, restructurings and purchase price allocations in advance
Reporting and group accounting
- assessing the group's reporting instructions
- reviewing the structure of the group reporting packages
- assessing the reconciliation process for intra-group balances
Coordination and timetable
- planning the instructions issued to component auditors
- agreeing reporting dates and audit deadlines
- aligning responsibilities and requests for documentation
Proactive planning does not mean preparing the consolidated financial statements on management's behalf or approving accounting solutions in advance. The group's management is responsible for the consolidated financial statements and for the solutions applied in them. The auditor's task is to maintain independence and to assess the financial information subsequently prepared in accordance with the applicable requirements.
What does a well-planned group audit deliver?
An overall picture
The group's board and management receive information, based on an independent audit, on the reliability of the consolidated financial statements and of the reporting chain behind them.
Risk-based focus
Audit work is directed at the risks, components, transactions and financial statement items that are material to the consolidated financial statements.
A consistent audit model
Audit work performed in the different parts of the group is coordinated on the basis of the group's common risks, materiality and reporting needs.
A predictable process
Timetables, responsibilities, reporting packages and documentation are fitted into the group's reporting process well in advance.
Visibility of group-level questions
The audit brings out material questions relating to, for example, intra-group balances, transactions, valuations, foreign operations and reporting controls.
Clear reporting
Reporting separates matters affecting the consolidated financial statements, findings concerning individual components, and observations on the reporting process.
When does a group audit require particular attention?
Consolidated financial statements are prepared when the parent company has control over one or more other entities and no applicable exemption releases it from the obligation to prepare consolidated financial statements.
The group is formed or changes
- a company establishes or acquires its first subsidiary
- companies are consolidated into the consolidated financial statements for the first time
- the group structure changes as a result of an acquisition, merger or demerger
- foreign subsidiaries join the group
- the business is spread across several industries or countries
Reporting requirements increase
- reporting moves to IFRS
- the group is preparing for a financing arrangement, a change of ownership or a listing
- wider reporting requirements apply to a public limited company or another regulated entity
- reconciliation, timetable or quality shortcomings have been identified in group accounting
A group audit is best planned before the consolidated financial statements are finalised, so that the reporting packages, the component audits and the group accounting timetable can be fitted into the same process.
The audit is directed at the risks in the consolidated financial statements
Assessing components and risks
In a group audit we obtain an understanding of the group structure and identify the risks of material misstatement in the consolidated financial statements that the audit must respond to. On that basis we assess in which components, business operations, processes, transactions or financial statement items audit work is required.
The assessment may be influenced by, for example:
- the financial significance of a component
- the materiality of a particular financial statement item
- the nature of the business
- unusual transactions
- significant management estimates
- acquisitions and restructurings
- country or industry related risks
- shortcomings in the reporting process or controls
- an elevated risk of fraud
A company or other component that is small relative to the group's overall figures may still require audit work if it carries a risk that is material to the consolidated financial statements.
Determining the nature and extent of audit work
Audit work of the same extent is not performed in every component. On the basis of the identified risks, the group auditor determines where audit work is performed and what procedures are needed to obtain sufficient appropriate audit evidence. Depending on the circumstances, audit work may be directed at, for example:
- the entire financial information of a component
- specific financial statement items or information
- a specific identified risk
- group-level processes and controls
- the consolidation process
- analytical procedures performed at group level
Work performed in connection with a local statutory audit can be taken into account only to the extent that it corresponds to the purpose of the group audit and the group auditor assesses it to be appropriate. The subjects, nature and extent of audit work are determined on the basis of the group's risks, materiality, the consolidation process and the audit evidence required.
Critical audit areas in group accounting
Consolidated financial statements are built from the data of several companies, group-level calculations and reporting processes. Select below the audit area that is most relevant to your group.
The consolidation process and group accounting
Consolidated financial statements are formed from the accounting records, reporting packages and group-level adjustments of the various companies. The audit assesses, among other things:
- the correct scope of the entities consolidated into the group
- the completeness of the reporting packages
- the compatibility of charts of accounts and reporting structures
- the alignment of financial periods
- the consistency of accounting policies
- group adjustments and eliminations
- translation differences
- non-controlling interests
- the treatment of associates and joint ventures
- the group cash flow statement and the notes
A single error can affect several items in the consolidated financial statements. The audit is therefore not confined to the mathematical accuracy of the calculations but is also directed at the structure of the consolidation process and the material controls over it.
Elimination of intra-group items
Intra-group transactions and balances are eliminated so that the consolidated financial statements present the group as a single economic entity. The audit may assess, for example:
- intra-group sales and purchases
- intra-group receivables and liabilities
- intra-group loans and interest
- service charges
- group contributions and dividends
- intra-group asset or business transactions
- unrealised intra-group margins in inventories
- exchange differences relating to intra-group items
- the reasons for reporting differences between the parent company and the subsidiaries
Purchase price allocations and goodwill
The acquisition of a new subsidiary often affects the consolidated financial statements for several years. In the purchase price allocation (PPA), the audit may assess, for example:
- the acquisition date and the point at which control arose
- the purchase consideration and its components
- contingent consideration
- the measurement of the assets acquired and liabilities assumed
- deferred tax effects
- the share of non-controlling interests
- the goodwill arising
- post-acquisition adjustments
- the amortisation of goodwill or impairment testing under the applicable framework
The accounting treatment of acquisitions often involves significant estimates. In addition to the calculations, the audit assesses the reliability of the assumptions used and of the underlying source material.
Group reporting packages
The group's internal reporting package brings a subsidiary's financial information into the consolidated financial statements. A reporting package may contain, for example:
- trial balance data
- the income statement and the balance sheet
- intra-group balances and transactions
- group adjustments
- differences between local and group accounting policies
- fixed asset, lease and tax information
- contingencies and commitments
- related party information
- cash flow information
- schedules concerning going concern and the notes
A well-designed group reporting process reduces the manual corrections and clarification needs that arise in the final stages of preparing the consolidated financial statements.
Cooperation with the auditors of subsidiaries
A group may have several auditors in Finland and abroad. As group auditor we are responsible for the auditor's report on the consolidated financial statements and for ensuring that the audit work concerning the group provides a sufficient basis for our conclusion. Depending on the circumstances of the engagement, cooperation with other auditors may include:
- preparing group audit instructions
- communicating materiality levels
- communicating the group's significant risks
- determining the audit procedures required
- agreeing reporting timetables
- assessing the competence and independence of the auditors
- monitoring the progress of the audit work
- dealing with findings and uncorrected misstatements
- assessing the documentation required
- reviewing the final reports
The objective is that the audit work concerning the subsidiaries supports the conclusion on the consolidated financial statements in a sufficient and consistent manner.
Does your group structure involve acquisitions, foreign companies or several auditors?
Tell us briefly about the group's structure and reporting model. We will make a preliminary assessment of how the planning of the group audit and the coordination of the subsidiaries' work should be organised.
Auditing FAS and IFRS consolidated financial statements
We serve groups reporting under both Finnish accounting legislation and IFRS. The focus areas of the audit are always determined by the group's structure, business, transactions and the applicable reporting framework.
FAS consolidated financial statements
In consolidated financial statements prepared under the Finnish framework, the audit may be directed at, for example:
- the obligation to prepare consolidated financial statements and any exemptions
- the consolidation of subsidiaries and other entities
- the acquisition method
- consolidation goodwill and negative goodwill
- the elimination of unrealised intra-group margins
- non-controlling interests
- group goodwill and its treatment
- associated undertakings
- the notes to the consolidated financial statements
- the group information presented in the report of the board of directors
IFRS consolidated financial statements
In an IFRS group, the focus areas of the audit may include, for example:
- the assessment of control (IFRS 10)
- business combinations (IFRS 3)
- fair value measurements
- impairment testing of goodwill (IAS 36)
- leases (IFRS 16)
- financial instruments
- revenue recognition
- share-based payments
- deferred taxes
- segment reporting
- discontinued operations
- extensive disclosure and presentation requirements
In an IFRS audit, management estimates, valuations and the extent of the information given in the financial statements are often emphasised. The standards mentioned above are examples and do not form a complete list.
We identify the risks that hide at group level
The risks in consolidated financial statements are not always visible in the local financial statements of an individual subsidiary.
Intra-group differences
The intra-group receivables, liabilities, income and expenses reported by subsidiaries do not agree with each other.
Acquisitions and restructurings
The acquisition date, the purchase price allocation, goodwill or the consolidation of companies has been treated incompletely or in the wrong period.
Differing accounting policies
A subsidiary's local accounting is based on accounting policies that differ from those of the consolidated financial statements, and the necessary adjustments have not been made or documented.
Foreign companies and currencies
Currency translations, translation differences or the reporting of foreign units contain technical errors or significant estimates.
Manual group adjustments
Manual entries made outside the group reporting system are poorly documented, unapproved or prone to error.
Valuations and going concern
The value of subsidiary shares, receivables, goodwill or other assets depends on forecasts, assumptions and management estimates.
The risk-based nature of a group audit means that the audit is directed at those companies, transactions and calculations that may have a material effect on the consolidated financial statements.
How a group audit proceeds
- 1
Understanding the group and the reporting model
We map the group structure, the business operations, the subsidiaries, the ownership relationships, the systems, the financial reporting framework applied and the reporting responsibilities.
- 2
Determining the risks and the subjects of audit work
We identify the risks of material misstatement in the consolidated financial statements and determine in which components, financial statement items and processes audit work is required.
- 3
Coordinating the audits of subsidiaries
Where necessary we prepare audit instructions, agree reporting timetables, and communicate the group's significant risks and reporting needs to the other auditors.
- 4
Auditing group accounting and consolidation
We audit the group's consolidation process, eliminations, acquisition calculations, group adjustments, cash flow statement and the notes to the consolidated financial statements.
- 5
Overall assessment and reporting
We assess the consolidated financial statements as a whole, deal with the matters reported by the auditors of the subsidiaries, and communicate material findings to the group's management, the board of directors and, where applicable, the audit committee.
Does your group's audit need to fit a tight reporting timetable?
Tell us the target timetable for the consolidated financial statements, the subsidiaries' reporting dates and the framework in use. We will assess how the audit can be phased into the group's reporting process.
Data-assisted group audit
In a group audit, information may have to be combined from several companies, systems and reporting packages. Data analytics can be applied, at our discretion, to the following themes:
Reconciliations
- intra-group items
- reporting packages
- local accounting records
Identifying anomalies
- manual entries
- unusual contra accounts
- missing or duplicated eliminations
Group-level analysis
- changes between companies
- currency and translation differences
- analytical procedures at group level
Technology makes it possible to process larger data sets and to direct the audit at the differences and transactions that require the auditor's professional judgement. Data analytics does not replace professional judgement and does not by itself produce audit evidence.
Group instructions and reporting controls
Reliable group reporting is built on common instructions, a clear division of responsibilities and effective controls. As required, the audit may assess the following themes:
Instructions and accounting policies
the group's financial statements and reporting instructions, and the consistency of accounting policies.
Reconciliations and group adjustments
the reconciliation process for intra-group items and the approval of group adjustments.
Access rights and approvals
access rights to the group reporting system and manual entries.
Reporting packages and deadlines
the review and approval practices for subsidiaries' reports, and the monitoring of reporting deadlines.
An audit is not a separate internal control consulting project. The material findings arising in the audit may nevertheless help the group identify areas for improvement in the reporting process.
A flexible timetable and a clear division of responsibilities
The consolidated financial statements often involve the parent company's finance management, the subsidiaries' finance functions, accounting firms, group accounting specialists, local auditors and other advisers. At the start of the process the following are agreed, for example:
Timetables and deadlines
the target timetable for the consolidated financial statements, the subsidiaries' reporting dates and the audit deadlines.
Responsibilities and approvals
the persons responsible for the reporting packages, and the preparers and approvers of group adjustments.
Open questions and reporting
how open questions are handled and how matters are reported to the board of directors or the audit committee.
A clear division of responsibilities reduces delays in the reporting chain and situations in which material information is left unresolved in the final stages of the process.
Also for large and regulated groups
Large, public or otherwise regulated groups may involve reporting, governance and audit questions that are more demanding than usual. The extent of the audit and the expertise required are always determined on the basis of the group's structure, the applicable regulation and its reporting obligations.
- IFRS and segment reporting
- the reporting needs of the audit committee
- the interfaces with corporate governance and remuneration reporting
- the connection between financial reporting and other regulated disclosure
Why choose us?
Consolidated financial statements expertise of an Authorised Public Accountant (APA)
The audit combines knowledge of group accounting, financial reporting frameworks and demanding audit questions.
An audit approach adapted to FAS and IFRS groups
The focus areas of the audit are determined on the basis of the applicable framework, the group structure, the identified risks and the material transactions.
Risk-based and data-assisted working
Audit work is directed at those components, processes, transactions and calculations that matter for the conclusion on the consolidated financial statements.
Direct and proactive cooperation
We work clearly with the group's finance management, the board of directors and, where necessary, with other auditors in Finland or abroad.
- service in Finnish and English
- a personally responsible auditor
- clear requests for documentation
- an agreed communication model
One audit view of the entire group
The purpose of a group audit is to bring together the audit work performed in the different parts of the group, group accounting and the reporting chain into a single reasoned whole. The work is directed at the risks, transactions and components that matter for the reliability of the consolidated financial statements.
Does your group need a consistent and predictable audit model?
Whether your group is being formed for the first time, expanding through acquisitions, moving to IFRS reporting or developing its group reporting process, we help design an audit approach that suits the group's structure. Leave us a contact request and tell us briefly about the group's structure, the number and location of the subsidiaries, the financial reporting framework applied, any other auditors involved and the target timetable for the consolidated financial statements. We will assess the preliminary scope of the engagement and propose an appropriate way forward.
Audit services and audit engagements are provided by David Vatka, Authorised Public Accountant (APA), in his own name.