Component Materiality for Group Audits

Determining overall group materiality and materiality levels for individual components is becoming more of a hot-button issue as the number and complexity of large and international group audits increases. Auditing standards and other professional materials offer little practical guidance on the topic. Internal and peer reviews and regulatory inspections have revealed a variety of approaches in this area. In some instances, reviews have discovered potentially troubling practices. Our conversations with regulators and practitioners indicate an intense and growing interest in the development of conceptually sound guidance. This article outlines a practical approach that group engagement partners can consider in establishing or evaluating component materiality.