Page 187 - CA Final PARAM Digital Book.

ii. The financial statements of 5 branches are included in the Standalone Financial Statements of BDS
Ltd. whose financial statements reflect total assets of ₹ 90 crores as at 31.03.2023 and total revenue
from operations of ₹ 40 crores for the year ended on that date. The financial statements of these
branches have been audited by the branch auditors.
Answer  Emphasis of Matter
We draw attention to the following note of the standalone financial statements:
Note 27 regarding the plans of the Company to resume construction/developmental activities of a
thermal power project. The carrying amounts related to the project as at 31st March, 2023 comprise of
plant and equipment of ₹ 5.95 crore and capital work in progress of ₹ 147.50 crore.

Our opinion is not modified in respect of this matter.

 Other Matter
We did not audit the financial statements of 5 branches included in the Standalone Financial Statements
of the company whose financial statements reflect total assets of ₹ 90 crores as at 31.03.2023 and total
revenue from operations of ₹ 40 crores for the year ended on that date. The financial statements of
these branches have been audited by the branch auditors whose reports have been furnished to us, and
our opinion in so far as it relates to the amounts and disclosures included in respect of these branches,
is based solely on the report of the branch auditors.

Our opinion is not modified in respect of this matter.

EMP-Case study on impact of Change in LAW on Old Course – (N22M)
QNO Financial position
123.500
TITANIUM CNO—SA706.040
Difficult Books Limited is engaged in manufacturing of active pharmaceutical ingredients. Due to change
in laws and regulations, every company engaged in manufacturing in active pharmaceutical ingredients
would now require production capacity license which will restrict the production of companies.
Management of the company assessed the impact of the change in law over the financial position of
company and appropriately disclosed the same in the financial statement. Audit Team of the company
evaluated management's disclosure and found it appropriate and sufficient. However, considering the said
matter as most important and fundamental to users understanding regarding financial statement the audit
team decided to disclose the same in Other Matter Paragraph. You as an Engagement Partner are required
to guide the Audit Team with respect to reporting of the said matter in Audit Report.
As per SA 706, “Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s
Report” if the auditor considers it necessary to draw users’ attention to a matter presented or disclosed in
the financial statements that, in the auditor’s judgment, is of such importance that it is fundamental to users’
understanding of the financial statements, the auditor shall include an Emphasis of Matter paragraph in the
auditor’s report provided:

(i)The auditor would not be required to modify the opinion in accordance with SA 705 as a result
of the matter; and
(ii) When SA 701 applies, the matter has not been determined to be a key audit matter to be communicated
in the auditor’s report.

In the instant case, since Difficult Books Limited is engaged in manufacturing of active pharmaceutical
ingredients, would now require production capacity license which will restrict the production of companies,
due to change in laws and regulations. Management of the Difficult Books Limited assessed the impact of
the change in law over the financial position of company and appropriately disclosed the same in the financial
statement.

Audit team of the Difficult Books Limited evaluated management's disclosure and found it appropriate and
sufficient. However, considering the said matter as most important and fundamental to users understanding
regarding financial statement the audit team decided to disclose the same.

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