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Transnational Audit (TAC Guidance (Audits of entities with listed equity…
Transnational Audit
TAC Guidance
Audits of entities with listed equity or debt are always transnational audits as their financial statements are or may be relied upon outside their home jurisdiction. Even where an entity currently has no foreign shareholders there is a possibility that the financial statements may be relied on by a foreign investor or creditor at some future date in an actual or potential investment or lending decision and it is therefore appropriate to consider the audit as a transnational audit.
The definition of a transnational audit should be applied to the whole group audit, as defined in ISA 600, including all the components whose financial information is included in the group financial statements. The audit of an individual component of a group could, however, be a transnational audit without the group audit being transnational if the component qualifies under the criteria.
Audits of foreign subsidiaries may be transnational audits even where the audit is primarily performed to comply with national regulations in the foreign country. However, foreign subsidiaries may not be classified as transnational if they are insignificant particularly where the parent company audit is not classified as transnational or if the audit of the parent company is not classified as transnational and the audit of the subsidiary would not be classified as a transnational audit if it were not for the ownership structure alone.
The types of entities for which the audit might be considered transnational because of their size or the nature of the products and services they provide include, for example, large charitable organizations or trusts, major monopolies or duopolies, providers of financial or other borrowing facilities to commercial or private customers, deposit-taking organizations and those holding funds belonging to third parties in connection with investment or savings activities.
Audits of government owned entities would not fall within the definition “transnational audit” unless their financial statements are or may be relied upon outside the home jurisdiction or they “attract particular attention because of their size, products or services provided”. However, the audits of many large government-owned entities would fall within the definition of “transnational audit” because of foreign borrowings. The fact that the audit of a government owned entity is classified as a transnational audit under either of the two criteria, does not mean that the audits of other entities owned by the same government automatically become transnational; each entity needs to be considered separately against the criteria.
Definiton
Transnational audit means an audit of financial statements which are or may be relied upon outside the audited entity's home jurisdiction for purposes of significant lending, investment or regulatory decisions; this will include audits of all financial statements of companies with listed equity or debt and other public interest entities which attract particular public attention because of their size, products or services provided.
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