A group audit is not several audits added together. It is one opinion on consolidated financial statements, supported by work performed at component level to a plan set centrally. Understanding that distinction explains most of what goes wrong.
Who is responsible for what
The group auditor signs the group opinion and is responsible for it. That responsibility does not transfer to component auditors, even where components are audited by different firms in different countries.
What follows from that is often unwelcome to component teams: the group auditor directs the work. They determine which components are in scope, what work is done, at what materiality, and to what timetable. A component auditor who does an excellent local statutory audit but ignores the group instructions has not helped the group opinion.
Scoping: not every subsidiary gets the same treatment
Components are scoped by significance and by risk. In practice this produces three tiers.
Full scope. Significant components get a full audit at component materiality, which is lower than group materiality.
Specified procedures. Components that are not individually significant but carry risk in particular areas get targeted work: revenue testing, a debtors circularisation, an inventory count attendance.
Analytical procedures only. Small, low-risk components are covered by review at group level.
This is worth understanding because it explains why your Spanish subsidiary is being asked for a great deal and your Dubai one for almost nothing, when their turnovers are similar. Risk, not just size, drives scope.
Component materiality catches people out
Component materiality is set below group materiality, sometimes considerably below. The reason is arithmetic: if every component were audited at group materiality, undetected errors across components could aggregate above it.
The practical effect is that a component auditor may be testing to a threshold that seems disproportionate to the size of the entity. It is not the group auditor being difficult. It is how the aggregation risk is managed.
Where group audits actually fail
Not on technical matters. On logistics.
Instructions issued too late. Group audit instructions should reach component auditors with enough time to plan. Instructions arriving after component fieldwork has been planned means either rework or a gap.
Timetables set without reference to local deadlines. Component statutory deadlines vary by jurisdiction and rarely align neatly with the group reporting calendar. A group timetable that ignores this creates a conflict that the component team resolves in favour of its local obligation.
Intercompany balances that do not agree. The most reliable source of delay in any group. Two entities recording the same transaction differently, in different currencies, cut off on different dates. Reconciling intercompany at the last minute is a guarantee of a late consolidation.
Consolidation adjustments prepared once, at the end. Eliminations, fair value adjustments, currency translation and minority interests all get prepared in one push after every component reports, which puts the most error-prone work at the point of greatest time pressure.
One component finishing late. The consolidation cannot complete until the last component reports. A group is only as fast as its slowest subsidiary, which is why chasing the slow one early matters more than optimising the fast ones.
What good looks like
Groups that run smoothly do a few things consistently.
They reconcile intercompany monthly, not annually, and they have a rule for who wins when balances disagree.
They issue group instructions early, and they ask component auditors to confirm they can meet the timetable rather than assuming it.
They prepare consolidation adjustments through the year, so that the year-end exercise is an update rather than a construction.
They have one person who owns the group timetable and who is chasing components before there is a problem.
And they use one auditor across the group where they can. It is not always possible, and there are good reasons to retain local firms. But one methodology, one materiality framework and one set of instructions removes an entire category of friction.
The question to ask your auditor
Ask how they will scope your components, and ask early. A group auditor who scopes at planning and tells you which entities are in scope and why gives you months to prepare. One who works it out during fieldwork gives you weeks, and the weeks are the ones you can least afford.