The future of subsidiaries’ statutory audits

The ultimate parent usually engages a single auditor to handle both group and statutory audits for the entire corporate group. In theory, there are two primary reasons for this preference: firstly, seamless coordination and avoidance of audit effort duplication; and secondly, reduced audit costs. The group audit for the ultimate parent is often completed ahead of—if not significantly ahead of—the statutory audits of the subsidiaries.

All else being equal, and assuming that statutory filing depends heavily on the reporting deadline set by each jurisdiction, every subsidiary can have a different timeline for completing its statutory audit.

While group audit and statutory audits are separate matters, does it benefit the company if the statutory audit is left behind? The answer depends on the maturity and audit readiness of the subsidiary's finance function—the more mature it is, the more it makes sense to complete the statutory audit as soon as practicable after the financial year-end, independent of the group audit timeline. From the perspective of both management and the auditor, it is easier to pick things up and maintain momentum while memories are still fresh rather than coming back to them several months later.

Moreover, adopting a reduced disclosure framework—such as IFRS 19 Subsidiaries without Public Accountability: Disclosures or IFRS for SMEs—can help reduce the time and effort required to prepare statutory accounts.

I envision that mature subsidiaries' statutory audits will no longer be completed significantly behind the completion of the group audit.

If you’re navigating growth and needing finance function guidance, contact VMC.

VMC's views are general insights—not one-size-fits-all advice. Every company's situation is unique.