Page 265 - CA Final PARAM Digital Book.

including the elimination of intra-group transactions.

Reporting Old Course – (M17R, M17E, M18R, N18M, M18M, M20M, SM21, N21M, M22R,
QNO TITANIUM CNO—
443.000 N23M)
GA.340 New Course – (SM23)
You are appointed as an auditor of Nawab Limited, a listed company which is a main supplier to the UK
building and construction market. With a turnover of 2.9 billion, the company operates through 11
business units and has nearly 180 branches across the countries. As an auditor, how will you draft the
report in case:
(a) When the Parent’s Auditor is also the Auditor of all its Components?
(b) When the Parent’s Auditor is not the Auditor of all its Components?
(c) When the Component(s) Auditor Reports on Financial Statements under an Accounting
Framework Different than that of the Parent?
(d) When the Component(s) Auditor Reports under an Auditing Framework Different than that of
the Parent?
(e) Where the financial statements of one or more components is not audited
OR
C Ltd is holding 55% shares of D Ltd M/s AB & Associates are statutory auditors of C Ltd whereas for D Ltd
there is another firm appointed as statutory auditors What are the reporting responsibilities of M/s AB &
Associates for audit of consolidated financial statements?
Answer (a) Parents auditor While drafting the audit report, the auditor should report whether Principles /
= Auditor of all procedures for preparation / presentation is as per accounting standard.

Components
In case of any departure or deviation, the auditor should make adequate
disclosure in the audit report so that users of the consolidated financial
statements are aware of such deviation.

Auditor should issue an audit report expressing opinion whether the -consolidated
financial statements, (at b/s date)
-consolidated profit and loss statement (during the year)
-cash flow (if prepared)
give a true and fair view of the state of affairs of the Group.
(b) Parents The auditor of the CFS should consider the requirement of SA 600.
Auditor not As per SA 706-
Same as if the auditor considers it necessary to make reference to the audit of the other
component auditors i.e. considers it material, the auditor’s report on the CFS should disclose
auditor clearly the magnitude of the portion of the financial statements audited by the
other auditor(s).

This may be done by stating in aggregate:
Rs or % of total assets, revenues and cash flows of components included in the CFS
not audited by the parent’s auditor.

Above should be presented before giving effect to permanent and current period
consolidation adjustments.
Reference in audit report of CFS that part of the audit of the group was made by
other auditor(s) is not to be construed as a qualification of the opinion but rather
as an indication of the divided responsibility between the auditors of the parent
and its components.
(c) FRF of The parent may have components located outside India applying an accounting
component is framework (GAAP) that is different than that of the parent in preparing its FST.
different from When a component’s FST are prepared under an accounting framework that is
FRF of Parent
different than that of the framework used by the parent in preparing group’s CFS ,
the parent’s management perform a conversion of the components’ audited FST
from the framework used by the component to the framework under which the
CFS are prepared.

The conversion adjustments are audited by the principal auditor to ensure that the
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