Group Auditors Explained: What Businesses Need to Know About Consolidated Accounts

Many Malta-based groups operate internationally through subsidiaries, SPVs, holding companies, or overseas operations. In such cases, businesses may be required to prepare consolidated financial statements, which often require an audit of the consolidated accounts.

This article explains what a group audit involves, what a group auditor does, and how work performed by component auditors fits into one final audit opinion.

What is a group audit?

A group audit is the audit of those consolidated financial statements. It brings structure, consistency, and credibility to financial reporting across multiple companies and jurisdictions, and it supports one audit opinion on the consolidated financial statements.

While it typically involves more than one audit team, especially when components operate in different jurisdictions, the outcome is one audit opinion on the group accounts. The group auditor is the person responsible for bringing everything together.

When are consolidated accounts required in Malta?

In Malta, a company may be required (or expected) to prepare consolidated financial statements when it sits at the top of a group and has control over one or more entities, whether in Malta or overseas. Consolidated accounts present the group as one economic entity, rather than a collection of separate companies.

Consolidated accounts may be required in a number of common situations, including:

• Group structures involving a parent entity and subsidiaries

Where a Maltese entity controls one or more subsidiaries (including SPVs), consolidated financial

statements are generally required under the applicable reporting framework.

• International operations and multi-jurisdictional groups

Even where each subsidiary prepares its own statutory accounts locally, consolidated accounts are

needed to provide a single view of the group’s financial performance and position.

• Growth through acquisitions, restructuring or new entities

Changes in group structure often trigger consolidation requirements and increases complexity around

consolidation adjustments, accounting policy alignment and disclosures.

• External stakeholder requirements

Banks, investors, regulators, grant authorities, or counterparties may require audited consolidated

financial statements as part of financing, due diligence, or compliance, even where local statutory

exemptions may apply

Group auditor vs component (local) auditor

Group audits typically involve two types of audit teams:

Component auditors (local auditors)

Component auditors perform audit work on individual subsidiaries (components). This is practical because they understand local accounting and regulatory requirements, tax and payroll issues, systems, language, and business practices. In many cases, they may also be the statutory auditors of those local entities.

The group auditor (the lead auditor)

The group auditor leads the audit of the consolidated financial statements. They set the overall audit approach across the group, decide where the key risks are, determine what work is required at component level, and specify what needs to be reported back. Most importantly, the group auditor forms and signs the audit opinion on the group accounts.

Why component work matters

A strong group audit depends on strong work at component level. Component audit work helps ensure that the building blocks of the consolidated financial statements are properly tested and understood, and that issues are addressed at the right level before everything is brought together.

Common challenges in group audits

Group audits often involve multiple entities, jurisdictions, reporting teams and timelines. As a result, issues most commonly arise not from individual figures in isolation, but from inconsistencies across the group and how information is prepared for consolidation.

Common challenges in group audits include:

• Inconsistent reporting packs across subsidiaries, particularly where financial information is extracted from different accounting systems

• Intercompany balances and transactions not reconciled (for example: loans, management fees, dividends or trading balances), which can delay consolidation eliminations

• Different accounting policies across entities, particularly where subsidiaries apply local practices that differ from the group’s reporting framework

• Foreign currency translation complexities, especially where exchange rates, translation approaches or reserve movements are not consistently applied

• Different year ends within the group, requiring roll-forward procedures and additional group-level judgement

• Delays in component auditor reporting, especially where timelines and deliverables are not agreed early in the process

• Weak consolidation documentation, such as unsupported consolidation journals, unclear eliminations, or limited narrative explanations for key adjustments

  
  

Identifying these challenges early and addressing them through structured planning and communication helps reduce delays and strengthens the quality of evidence supporting the consolidated financial statements.

What ISA 600 (Revised) strengthens

ISA 600 (Revised) reinforces that a group audit requires active leadership and coordination. It emphasises:

• Professional scepticism and a comprehensive risk assessment across the group

• Stronger planning and execution of audit work at both group and component level

• Two-way communication between the group auditor and component auditors

• Clearer expectations around documentation

• A stronger requirement for the group auditor to direct, supervise, and review component auditor work

Because the group auditor signs the final opinion, they must be satisfied that sufficient appropriate audit evidence has been obtained; not only over the consolidation process, but also over the relevant component financial information included in the group accounts.

Judgement, materiality, and complexity: deciding where to focus

ISA 600 does not provide a single qualitative benchmark for selecting components or determining the exact extent of work. That means the group auditor must apply judgement, taking into account factors such as:

• Group and component materiality

• Different year ends and the consolidation approach used

• Changes in group structure (acquisitions, disposals, restructures)

• Areas requiring significant judgement, which may increase audit risk

  
  

The group auditor also needs an understanding of group-wide controls relevant to the consolidation process, assess whether those controls are suitably designed and operating effectively, and decide whether reliance is appropriate when setting procedures on consolidation.

Why accountability can’t be split across borders

Even if multiple firms work on different subsidiaries, a group audit produces one opinion on the consolidated financial statements. ISA 600 is structured so responsibility for that opinion remains clear with the group auditor, who coordinates the overall approach and evaluates evidence from across the group. Work can be shared across jurisdictions; responsibility for the conclusion cannot. This is also reinforced by EU law, which provides that, in the statutory audit of consolidated accounts the group auditor bears full responsibility for the audit report on the consolidated financial statements.

Coordination that supports confidence and one audit opinion

Group audits work best when local expertise and group-level oversight come together. Component auditors provide depth at subsidiary level, while the group auditor connects the evidence across the group and ensures the consolidation has been properly addressed. The result is a clearer, more consistent audit approach and an audit opinion that users can rely on when assessing the group as a whole.

Our team at Quazar can assist with group audit engagements in Malta, including audits of consolidated financial statements and coordination with component auditors in line with applicable auditing standards.

Get in Touch:

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Sabrina Sacco

ssacco@quazar.mt / +356 2388 4600