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Group audit frequently asked questions (FAQs) December 2021

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Levvia Group Audit FAQs | Table of contents

i © 2021. For information, contact Deloitte Touche Tohmatsu Limited

GROUP ENGAGEMENT FILE CREATION CONSIDERATIONS ................................................................................................. 3

1. WILL LEVVIA ACCOMMODATE DIFFERENT SIGN-OFF DATES FOR THE GROUP AND A STANDALONE COMPONENT WHEN THEY ARE BOTH AUDITED IN THE GROUP ENGAGEMENT FILE? .......................................................................................................................... 3

2. WILL LEVVIA V2.1 BE ABLE TO TRACK CHANGES IN WORKING PAPERS IF THERE ARE MULTIPLE AUDIT OPINIONS IN AN ENGAGEMENT FILE WITH DIFFERENT AUDIT REPORT DATES? ................................................................................................................................ 3

3. WHERE IN THE ENGAGEMENT FILE DO I DETERMINE IF MY ENGAGEMENT IS A GROUP AUDIT? ........................................................... 4 4. CAN THE RADC ASSIST WITH TRANSITIONING LEVVIA V2.1 GROUP AUDIT ENGAGEMENTS? ............................................................. 4 5. WILL LEVVIA V2.1 ALLOW ME TO AUDIT SEVERAL ENTITIES WITH THE SAME INTERNAL CONTROL FRAMEWORK, MANAGEMENT,

SHAREHOLDERS, ETC., BUT WITHOUT A HOLDING COMPANY OR CONSOLIDATION? ......................................................................... 4 6. IF THE GROUP HAS A COMPONENT THAT IS ACCOUNTED FOR AS AN EQUITY METHOD INVESTMENT (EMI), CAN I USE LEVVIA V2.1? ......... 4 7. CAN I PERFORM A STANDALONE AUDIT OF AN EMI WITHIN THE GROUP ENGAGEMENT FILE? ............................................................ 4 8. CAN I USE THE LEVVIA V2.1 GROUP ENGAGEMENT FILE FOR THE AUDIT OF COMBINED FINANCIAL STATEMENTS (I.E., NOT CONSOLIDATED)?

5 9. CAN I CONVERT A SINGLE ENTITY ENGAGEMENT FILE TO A GROUP ENGAGEMENT FILE IN LEVVIA V2.1? ............................................... 5 10. IS THERE A LIMIT TO THE NUMBER OF COMPONENTS THAT CAN BE INCLUDED IN THE GROUP ENGAGEMENT FILE?.................................. 5 11. ON ENGAGEMENT CREATION, THE “GROUP INFORMATION” PAGE IS COMPLETED WITH THE COMPONENT NAMES AND DETAILS IF THE

AUDIT WILL BE PERFORMED IN THE ENGAGEMENT FILE. CAN THIS INFORMATION BE CHANGED AFTER CREATION? ................................. 5 12. CAN THE GROUP ENGAGEMENT FILE INCLUDE A NONSIGNIFICANT COMPONENT FOR STANDALONE AUDIT PURPOSES? ............................ 5

MATERIALITY AND RISK ASSESSMENT ............................................................................................................................... 6

1. IS THERE A SEPARATE MATERIALITY WORKING PAPER FOR COMPONENTS WITH A STANDALONE AUDIT THAT ARE INCLUDED WITHIN THE GROUP ENGAGEMENT FILE? ................................................................................................................................................ 6

2. WHAT WILL I NEED BEFORE I CAN COMPLETE THE PRELIMINARY ANALYTICAL PROCEDURES AND IDENTIFICATION OF MATERIAL ABCOTDS AND GROUP AUDIT TESTING STRATEGY WORKING PAPERS? ........................................................................................................ 6

3. CAN I COMMENCE THE GROUP AUDIT ENGAGEMENT WITHOUT THE CONSOLIDATING JOURNAL ENTRIES? ............................................ 6 4. ARE THERE SEPARATE STANDARD ROMMS RELATED TO CONSOLIDATION? ................................................................................... 6 5. IS THE RESIDUAL BALANCE CALCULATED BY THE SYSTEM? .......................................................................................................... 6 6. IN THE GROUP AUDIT TESTING STRATEGY, FOR THE RESIDUAL BALANCES, WILL THERE BE A SECTION TO CONCLUDE?.............................. 6

PERFORMING, EVALUATING, AND CONCLUDING ............................................................................................................... 7

1. WILL I NEED TO DOCUMENT PLANNING WORKING PAPERS WITHIN THE “ENGAGEMENT RISKS AND ACCEPTANCE” AND “UNDERSTANDING” SUBPHASE FOR EACH COMPONENT WITH A STANDALONE AUDIT? ................................................................................................ 7

2. WILL I HAVE SEPARATE WORKING PAPERS FOR THE EVALUATION AND CONCLUSION OF THE AUDIT FOR A COMPONENT WITH A STANDALONE AUDIT IN THE GROUP ENGAGEMENT FILE? .............................................................................................................................. 7

3. WILL I BE ABLE TO EVALUATE MISSTATEMENTS IDENTIFIED USING THE DIGITIZED MISSTATEMENT SCHEDULE AT A GROUP LEVEL IN THE GROUP ENGAGEMENT FILE? ................................................................................................................................................ 7

4. WILL I BE ABLE TO LEVERAGE THE SUBSTANTIVE TESTING OF THE COMPONENT WITH A STANDALONE AUDIT FOR THE GROUP AUDIT IF THEY ARE BOTH AUDITED IN ONE ENGAGEMENT FILE? ...................................................................................................................... 7

5. FOR A SUBSTANTIVE PROCEDURE TO BE TESTED AT THE GROUP LEVEL, WILL SEPARATE SUBSTANTIVE WORKING PAPERS BE GENERATED FOR THE COMPONENTS, OR WILL I HAVE ONE WORKING PAPER? ....................................................................................................... 7

6. CAN I COPY OR TRANSFER DIGITIZED WORKING PAPERS FROM ONE LEVVIA ENGAGEMENT FILE TO ANOTHER? ...................................... 7 7. IF I AUDIT A COMPONENT IN A SEPARATE LEVVIA ENGAGEMENT FILE, CAN I MOVE ACROSS DIGITIZED REFERRAL INSTRUCTIONS? .............. 8 8. HOW DO I PERFORM FURTHER AUDIT PROCEDURES ON THE GOODWILL AND/OR OTHER INTANGIBLE ASSETS WHEN THESE ACCOUNTS ARE

NOT RECORDED IN THE A COMPONENT’S TRIAL BALANCE (I.E. THE AMOUNTS ARE RECORDED IN THE CONSOLIDATION PROCESS)? ............ 8

TRIAL BALANCE AND CONSOLIDATION .............................................................................................................................. 9

1. CAN I PERFORM MULTILEVEL CONSOLIDATION IN A LEVVIA ENGAGEMENT FILE? ............................................................................. 9 2. HOW WILL LEVVIA CONSOLIDATION OF VARIOUS TRIAL BALANCE MAPPINGS AND AMOUNTS IN THE GROUP ENGAGEMENT FILE WORK? ..... 9 3. CAN THE TRIAL BALANCE MAPPING OF A COMPONENT THAT IS AUDITED WITHIN THE GROUP ENGAGEMENT FILE BE DIFFERENT FROM THE

GROUP’S TRIAL BALANCE MAPPING? ..................................................................................................................................... 9

Levvia Group Audit FAQs | Table of contents

ii © 2021. For information, contact Deloitte Touche Tohmatsu Limited

4. CAN THE TRIAL BALANCE MAPPING OF A COMPONENT THAT IS AUDITED IN A SEPARATE ENGAGEMENT FILE BE DIFFERENT FROM THE GROUP’S TRIAL BALANCE MAPPING? ..................................................................................................................................... 9

5. ARE CONSOLIDATED JOURNAL ENTRIES MANUALLY POPULATED, OR ARE WE ABLE TO UPLOAD A FULL SET OF CONSOLIDATION ENTRIES? .... 9

COMPONENT AUDIT CONSIDERATIONS ........................................................................................................................... 10

1. CAN I PERFORM A STANDALONE AUDIT ON A COMPONENT WITHIN THE GROUP ENGAGEMENT FILE? ................................................ 10 2. CAN THE AUDIT OF A COMPONENT BE PERFORMED IN A DIFFERENT DELOITTE PLATFORM FROM LEVVIA (E.G., EMS)? ........................ 10 3. CAN THE COMPONENT AUDITORS BE FROM DIFFERENT DELOITTE MEMBER FIRMS? ...................................................................... 10 4. WILL LEVVIA V2.1 ACCOMMODATE DIFFERENT SIGN-OFF DATES FOR A GROUP AUDIT AND STATUTORY AUDIT OPINION IN A COMPONENT

AUDIT ENGAGEMENT FILE? ............................................................................................................................................... 10

ARCHIVING ...................................................................................................................................................................... 12

1. WILL I BE ABLE TO SEPARATE THE GROUP AND STANDALONE COMPONENT ARCHIVE PACKAGE IF THE AUDIT IS PERFORMED IN ONE LEVVIA ENGAGEMENT FILE? ........................................................................................................................................................ 12

Levvia Group Audit FAQs | Group engagement file creation considerations

3 © 2021. For information, contact Deloitte Touche Tohmatsu Limited

Note: When reading through these FAQs, it is important to consider any local professional standards, regulatory and legal requirements, and member firm policies that may be applicable.

Group engagement file creation considerations 1. Will Levvia accommodate different sign-off dates for the Group and a standalone component

when they are both audited in the group engagement file? A group engagement file in Levvia v2.1 will only allow the input of a single “Report date” and “Archive due date.” These will be the dates that are retained in the archive retention system. The “Archive due date” will be the shorter of 60 days from the ‘”Report date” or the period stated in applicable professional standards and regulatory and legal requirements.

Engagement teams can include the standalone audit of a component within the group engagement file, provided both audits will be archived as a single audit package by the archive due date of the first signed audit opinion. This will only allow for a limited variation in the report date of the audits included in the engagement file. If it is expected that the audits cannot be performed to meet the same archive due date, the standalone audit of a component should be completed in a separate engagement file.

In the rare circumstance that the engagement team initially planned to complete both audits within the required timeframe, but the standalone audit report date will now be after the first signed audit opinion’s archive due date, Levvia v2.1 allows engagement teams to:

1. Copy the group engagement file. This must be done before archiving the group engagement file to support all audit opinions signed to date.

2. Archive the original group engagement file.

3. In the copied engagement file, complete the audit work relating to components and/or group audit opinions not signed in the original group engagement file.

4. Set the “Report date” and “Archived due date” of the copied engagement file based on the additional signed audit opinions. Archive the engagement file.

It is important to note that there are risks involved in performing the previous actions. Key risks include:

• The original engagement file will include incomplete working papers where they relate to specific audit work for the standalone audit opinion. These working papers are digitized and interlinked; therefore, they likely cannot be deleted or hidden in order to archive only the relevant working papers for the group.

• The copied engagement file will include all audit work that supports the previously archived audit (i.e., the group audit in this example), and if engagement teams edit any audit work that supported the previously archived audit, there will likely be inconsistencies between the archived engagement files.

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2. Will Levvia v2.1 be able to track changes in working papers if there are multiple audit

opinions in an engagement file with different audit report dates? No, Levvia v2.1 will not be able to track changes made to working papers within such an engagement file.

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Levvia Group Audit FAQs | Group engagement file creation considerations

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3. Where in the engagement file do I determine if my engagement is a group audit? When creating your Levvia v2.1 engagement you will need to select the type of audit (i.e., if it is a group engagement); the assessment of determining if your engagement is a group audit should already have been performed. This assessment will then be documented in working paper Understanding the group and its components within the engagement file once it is created (12100.02).

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4. Can the RADC assist with transitioning Levvia v2.1 group audit engagements?

Yes, ideally the RADC can support Levvia v2.1 transition activities.

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5. Will Levvia v2.1 allow me to audit several entities with the same internal control framework, management, shareholders, etc., but without a holding company or consolidation? No, Levvia v2.1 has been designed to support groups where the components are all consolidated in the group financial statements. The engagement flow includes a consolidated trial balance module, the determination of group and component materiality, preliminary analytical procedures and identification of material ABCOTDs at the consolidated group level, and a group audit testing strategy working paper that drives the audit work that will support the audit opinion on the consolidated financial statements. It does not support, within the group engagement file, the audit of components with standalone requirements that are not consolidated.

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6. If the group has a component that is accounted for as an equity method investment (EMI),

can I use Levvia v2.1? If the component accounted for as an equity method investment (EMI) will be audited by the group engagement team, Levvia v2.1 can be used. The group engagement team should note the following:

• There are no standard ROMMs, controls or substantive procedures for auditing EMIs in the Levvia v2.1 content. Customs ROMMs, controls and substantive procedures will need to be created by the group engagement team to audit the EMI. Refer to Chapter 6: Considering equity method investments of the Deloitte Group Audit Guide for guidance on EMIs.

• The EMI must not be listed as a component in the “Group information” tab as Levvia v2.1 does not support partial consolidation.

• The materiality of the component is required to be documented in an attachment within the Materiality (13100.01) working paper.

If the EMI will be audited by a component auditor, the group audit is out of scope for Levvia v2.1 as the current functionality does not accommodate for understanding, directing and supervising the component auditors of an EMI.

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7. Can I perform a standalone audit of an EMI within the group engagement file?

No, for Levvia v2.1 the audit of an EMI by the group engagement team is to be performed in a separate engagement file. Levvia v2.1 does not support partial consolidation of a component. The users of an EMI are potentially different from the group financial statements, therefore from a risk management perspective it is prudent to keep a separate file.

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Levvia Group Audit FAQs | Group engagement file creation considerations

5 © 2021. For information, contact Deloitte Touche Tohmatsu Limited

8. Can I use the Levvia v2.1 group engagement file for the audit of combined financial statements (i.e., not consolidated)? As noted in the section 1.3.2 of the Group Audit Guide, “Issuing consolidated or combined financial statements is a strong indicator that the entity is a group, as it is indicative that financial information is prepared from distinct, separate sources and is being aggregated or combined to generate the group financial statements.”.

Considering the above, Levvia v2.1 group audit workflow has been developed to accommodate a group audit as described in the Group Audit Guide and may be applicate to audit combined financial statements.

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9. Can I convert a single entity engagement file to a group engagement file in Levvia v2.1?

No, Levvia v2.1 will not support a conversion of a single entity engagement file (whether in-progress or archived) to a group engagement file. It is very important to determine if the audit is a group audit prior to creating your Levvia v2.1 engagement.

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10. Is there a limit to the number of components that can be included in the group engagement

file? In Levvia v2.1, there is currently no system limit to the number of components that can be added to the engagement file. It should be noted that performance testing of Levvia v2.1 is at early stages and in the event that the number of components becomes a limiting factor on performance, further guidance will be provided.

Practitioners should be careful as there is inherent risk of a complex group due to a significant number of components within the group. It would be important for practitioners to apply professional judgment when assessing if a large number of components, together with the other group decision tree considerations, meet the requirements of noncomplex group.

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11. On engagement creation, the “Group information” page is completed with the component

names and details if the audit will be performed in the engagement file. Can this information be changed after creation? Yes, the “Group information” page can be updated at any point prior to archiving. Components can be added or removed, and the details can be adjusted on the page. Once any changes are saved, this will update the group engagement file to reflect the status.

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12. Can the group engagement file include a nonsignificant component for standalone audit

purposes? Yes, in Levvia v2.1, nonsignificant components can be included in the group engagement file; separate working papers (including materiality) will be generated for standalone audit purposes.

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Levvia Group Audit FAQs | Materiality and risk assessment

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Materiality and risk assessment 1. Is there a separate materiality working paper for components with a standalone audit that are

included within the group engagement file? Yes, in Levvia v2.1, there is a separate materiality working paper for standalone audits. The system will, however, compare the standalone and component performance materiality to determine whichever is lower as the lower performance materiality will be used to perform audit procedures on the component.

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2. What will I need before I can complete the Preliminary analytical procedures and

identification of material ABCOTDs and Group audit testing strategy working papers? In Levvia v2.1, the group engagement team will need:

• Trial balances for each component that is consolidated in the group financial statements (interim or final).

• Trial balance mapping file. • Determination of group materiality.

It is also advised to enter or upload the consolidating journal entries.

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3. Can I commence the group audit engagement without the consolidating journal entries?

It is advised that the consolidation entries are included from the beginning of the audit so that appropriate risk assessment procedures are performed. If your entity does not perform an interim consolidation, the engagement team can use the prior-year consolidation entries as a starting point, provided they are representative of the current period so that the correct decisions are made in the Preliminary analytical procedures and identification of material ABCOTDs and Group audit testing strategy working papers.

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4. Are there separate standard ROMMs related to consolidation?

Yes, Levvia v2.1 will include standard ROMMs, controls, and procedures for consolidation.

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5. Is the residual balance calculated by the system?

Yes, the total residual balance is calculated by the system.

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6. In the Group audit testing strategy, for the residual balances, will there be a section to

conclude? Yes, evaluation of sufficiency and appropriateness of audit evidence can be documented in a separate column in the Group audit testing strategy table.

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Levvia Group Audit FAQs | Performing, evaluating, and concluding

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Performing, evaluating, and concluding 1. Will I need to document planning working papers within the “Engagement risks and

acceptance” and “Understanding” subphase for each component with a standalone audit? No, the “Engagement risks and acceptance” and “Understanding” subphases in Levvia v2.1 will typically only generate one instance of each working paper in the group engagement file. The working papers in these subphases will accommodate documentation of the group and components so that information does not need to be duplicated.

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2. Will I have separate working papers for the evaluation and conclusion of the audit for a

component with a standalone audit in the group engagement file? In Levvia v2.1, separate working papers will be generated in the “Evaluate” and “Conclude” subphases for the group and for each component where a standalone component is being audited within the group engagement file.

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3. Will I be able to evaluate misstatements identified using the digitized misstatement schedule

at a group level in the group engagement file? Yes, misstatements identified in components can be aggregated for the purpose of assessing these in relation to the group financial statements.

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4. Will I be able to leverage the substantive testing of the component with a standalone audit for

the group audit if they are both audited in one engagement file? If an ABCOTD is considered material for group reporting and the standalone audit of a component, the same risk assessment and testing working papers will be applicable for both audits. One materiality is used for both purposes (i.e., whichever is lower between component and standalone performance materiality). The outcome from audit testing will support both audits.

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5. For a substantive procedure to be tested at the group level, will separate substantive working

papers be generated for the components, or will I have one working paper? In Levvia v2.1, if a substantive procedure is being performed at a group level, one substantive working paper will be created to address the procedure.

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6. Can I copy or transfer digitized working papers from one Levvia engagement file to another?

No, in Levvia v2.1 it is not possible to copy or transfer digitized working papers between engagement files. The engagement team can manually copy across the information by opening both working papers from the different Levvia engagement files.

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Levvia Group Audit FAQs | Performing, evaluating, and concluding

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7. If I audit a component in a separate Levvia engagement file, can I move across digitized referral instructions? In Levvia v2.1, the referral instructions will not be digitized; the global referral instructions can be utilized and provided via email or through platforms such as Deloitte Connect. In the component’s engagement file, there will be the working paper, Component reporting to the group engagement team (22000.09) for the component to document the work relating to the referral instructions. In the group engagement file, deliverables received from component auditors will be documented in the working paper, Understand, direct, and supervise the work of component auditor (22000.10).

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8. How do I perform further audit procedures on the goodwill and/or other intangible assets

when these accounts are not recorded in the a component’s trial balance (i.e. the amounts are recorded in the consolidation process)? In Levvia v2.1, a separate trial balance mapping template is not uploaded for consolidation, therefore to perform further audit procedures on the goodwill and/or other intangible assets when the amounts are not recorded in a component’s trial balance, perform the following:

1. Create new TB accounts for goodwill and/or other intangible assets in the parent entity trial balance and map the accounts to Intangibles - goodwill and/or other intangible assets ABCOTD.

2. Post the consolidation entries to recognize goodwill and/or other intangible assets and map them to the NEW TB accounts.

3. Determine that goodwill and/or other intangible assets are material ABCOTDs in the WP 132000.01 Preliminary analytical procedures and identification of material ABCOTDs.

4. Select the appropriate testing strategy for goodwill and/or other intangible assets in the WP 13200.03 Group audit testing strategy.

5. In the Intangibles - goodwill and other - Identify and assess ROMMs and plan further audit procedures, map the selected procedures to the TB-NEW accounts and generate the corresponding DTWPs.

Note: In the risk assessment WP and DTWP, balances before consolidation entries will be presented and therefore the amount entered in the consolidation entries will not be reflected.

Obtain the balances after consolidation entries from the consolidated trial balance module when performing further audit procedures in the DTWPs.

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Levvia Group Audit FAQs | Trial balance and consolidation

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Trial balance and consolidation 1. Can I perform multilevel consolidation in a Levvia engagement file?

In Levvia v2.1, multilevel consolidation (i.e., group within a group) cannot be performed within the same Levvia engagement file.

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2. How will Levvia consolidation of various trial balance mappings and amounts in the group

engagement file work? The Levvia v2.1 trial balance module for a group engagement file works as follows:

• Engagement teams will need to obtain the trial balance amounts for all components that are consolidated in the group.

• Using the Trial Balance Toolkit, engagement teams will complete the mapping of all consolidated components into a single trial balance mapping file and upload this in Levvia.

• Separate trial balances amount files will be uploaded for each consolidated component.

Levvia will accumulate the trial balance amounts and provide the group consolidated value; this can be viewed at the detailed, note, or financial statement line level.

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3. Can the trial balance mapping of a component that is audited within the group engagement

file be different from the group’s trial balance mapping? No, as mentioned in the previous FAQ, there is only one trial balance mapping uploaded in a group engagement file; therefore, the mapping of the component will need to match the group mapping.

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4. Can the trial balance mapping of a component that is audited in a separate engagement file be

different from the group’s trial balance mapping? Yes, however, the component engagement team will need to reconcile the component trial balance mapping to the group trial balance mapping when reporting to the group engagement team.

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5. Are consolidated journal entries manually populated, or are we able to upload a full set of

consolidation entries? In Levvia v2.1, consolidating journal entries can be manually populated or uploaded using the Consolidation Entries Assistant included in the Trial Balance Toolkit for Levvia v2.

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Levvia Group Audit FAQs | Component audit considerations

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Component audit considerations 1. Can I perform a standalone audit on a component within the group engagement file?

Yes, in Levvia v2.1 you can perform the standalone audit within the group engagement file. It should be noted that the lower of the component and standalone audit performance materiality is used to perform both audits.

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2. Can the audit of a component be performed in a different Deloitte platform from Levvia (e.g.,

EMS)? Yes, there are two possible scenarios:

1. If the component is audited by the group engagement team but audited in a different Deloitte platform, referral instructions are not required; however, the group audit engagement team will need to manually transfer audit evidence to the group’s engagement file (e.g., materiality, material ABCOTDs, ROMMs, testing working papers, etc.).

2. If a component that has been scoped in for the group audit is audited by component auditors that are not part of the group engagement team, the group audit engagement team will need to send referral instructions to the component auditors.

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3. Can the component auditors be from different Deloitte member firms?

Yes, in Levvia v2.1 if the component auditors are from a different Deloitte member firm, the audit will need to be performed in a separate engagement file. The group engagement team will then need to send referral instructions to the component auditor.

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4. Will Levvia v2.1 accommodate different sign-off dates for a group audit and statutory audit

opinion in a component audit engagement file? An engagement file in Levvia v2.1 will allow input of a single “Report date” and “Archive due date.” These will be the dates that are retained in the archive retention system. The “Archive due date” will be dependent on the shorter of the group audit archive due date or the statutory audit archive due date.

Where there is a variation in the archive due date, Levvia v2.1 allows engagement teams to:

1. Copy the engagement file. This must be done before archiving the engagement file to support the group audit opinion signed.

2. Archive the original engagement file.

3. In the copied engagement file, complete the audit work relating to the opinion not signed in the original engagement file.

4. Set the “Report date” and “Archived due date” of the copied engagement file based on the second signed audit opinion. Archive the engagement file.

It is important to note that there are risks involved in performing the previous actions. Key risks include:

• The original engagement file will include incomplete working papers to support the second audit opinion. These working papers are digitized and interlinked; therefore, they cannot be deleted or hidden in order to archive only the relevant working papers for the group.

Levvia Group Audit FAQs | Component audit considerations

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• The copied engagement file will include all audit work that supports the previously archived audit, (i.e., the group audit in this example) and if engagement teams edit any audit work that supported the previously archived audit, there will be inconsistencies between the archived engagement files.

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Archiving 1. Will I be able to separate the Group and standalone component archive package if the audit is

performed in one Levvia engagement file? In Levvia v2.1, the archive package cannot be split out if the engagement was performed in one engagement file.

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