New standard provides risk-based approach to group audits

By Bryan Strickland

The AICPA Auditing Standards Board (ASB) on Tuesday issued Statement on Auditing Standards (SAS) No. 149, a standard that introduces a risk-based approach to planning and performing a group audit.

SAS No. 149, Special Considerations — Audits of Group Financial Statements (Including the Work of Component Auditors and Audits of Referred-to Auditors), supersedes SAS No. 122, as amended, Section 600, Special Considerations — Audits of Group Financial Statements (Including the Work of Component Auditors), and makes conforming amendments to other impacted SASs.

The ASB also issued Statement on Quality Management Standards (SQMS) No. 3, Amendments to QM Sections 10, A Firm's System of Quality Management, and 20, Engagement Quality Reviews, to conform certain terms used in the quality management standards to language used in SAS No. 149 and provide guidance on differentiating between a resource and an information source.

SAS No. 149, in superseding Section 600 of SAS No. 122, shifts the auditor's approach in determining the components at which to perform audit work from identifying "significant components" to using professional judgment based on assessed risk.

SAS No. 149 retains the two reporting options available to the group auditor in extant AU-C Section 600, which are referred to as "assuming responsibility for the work of component auditors" and "making reference to the audit of a component auditor." In SAS No. 149, the "assuming responsibility" option will now be referred to as "being involved in the work of component auditors" or "when component auditors are involved."

The issuance of SAS No. 149:

  • Introduces the term "referred-to auditor," and defines it as an auditor "who performs an audit of the financial statements of a component to which the group engagement partner determines to make reference in the auditor's report on the group financial statements." It also indicates that a referred-to auditor is not part of the engagement team; and
  • Revises the definition of component auditor to indicate that a component auditor is part of the engagement team.

The SAS and SQMS issued Tuesday are part of the ASB's efforts to converge its standards with those of the International Auditing and Assurance Standards Board. In this case, SAS No. 149 converges with International Standard on Auditing (ISA) 600, Special Considerations — Audits of Group Financial Statements (Including the Work of Component Auditors) (ISA 600 [Revised]), while featuring U.S.-specific jurisdictional considerations (including maintaining the reporting option of making reference to the audit of a component auditor).

SAS No. 149 is effective for audits of group financial statements for periods ending on or after Dec. 15, 2026, but now is the time for auditors to prepare. SQMS No. 3 is effective concurrently with the effective dates provided in QM Sections 10 and 20.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at

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