It has always been possible that a medium size or large UK group might include an unaudited subsidiary if the subsidiary is an overseas company and does not require an audit under local legislation. In this situation the parent company group auditors must determine the impact of the subsidiary on the group accounts and what audit work is required, and by whom.

This situation might also arise in future (accounting periods ending on or after 1 October 2012) in respect of UK subsidiaries if the subsidiary claims exemption from audit under s479A Companies Act 2006.