Page 266 - CA Final PARAM Digital Book.

financial information of the component(s) is suitable and appropriate for the
purposes of consolidation.

A component may alternatively prepare financial statements on the basis of the
parent’s accounting policies, as outlined in the group accounting manual.

Group accounting manual would normally contain all accounting policies, including
relevant disclosure requirements, which are consistent with the requirements of
the financial reporting framework under which the group’s consolidated financial
statements are prepared. The local component auditor can then audit and issue an
audit report on the components financial statements prepared in accordance with
“group accounting policies”.

When applying this approach of, the principal/parent auditors should perform
procedures necessary to determine compliance of the group accounting policies
with the GAAP applicable to the parent’s financial statements.
This ensures that the information will be directly usable and relevant for the
preparation of CFS by the parent entity, eliminating the need for auditing by the
auditor, the differences between the basis used for the component’s financial
statements and that of the consolidated financial statements.

The Principal auditor can then decide whether or not to rely on the components’
audit report and make reference to it in the auditor’s report on the consolidated
financial statements.
(d) Auditing Audits of FST, including CFS, are performed under auditing standards generally
Framework accepted in India (“Indian GAAS”). In order to maintain consistency of the auditing
used by framework and to enable the parent auditor to rely and refer to the other
component auditor’s audit report in their audit report on the CFS, the components’ FST should
auditor is also be audited under a framework that corresponds to Indian GAAS.
different from
parent’s
auditor
(e) Financial Where the FST of one or more components continue to remain unaudited, the
Statements of auditor reporting on the CFS should consider unaudited components in evaluating
component not a possible modification to his report on the CFS.
audited.
The auditor should evaluate both qualitative and quantitative factors on the
possible effect of such amounts remaining unaudited when reporting on the
consolidated financial statements using the guidance provided in SA 705,
“Modifications to the Opinion in the Independent Auditor’s Report”.

QNO Draft OMP For Subsidiaries Audited by Other Auditor New Course – (SM23)
443.020 TITANIUM CNO -- Unique

CA.MV Chitale is auditor of consolidated financial statements of “D and D Limited” for year 2022-23. The
consolidated financial statements consist of financial statements and financial information of 8
subsidiaries audited by other auditors. Such financial statements, financial information and auditor’s
reports of subsidiaries have been furnished by management of the “D and D Limited” to him. Following
further information is also available in respect of these 8 subsidiaries for year 2022-23: -

Total assets ₹ 1500 crore
Total revenues ₹ 1000 crore
Net cash outflows ₹ 10 crore

Two of these subsidiaries are located outside India whose financial statements have been prepared in
accordance with accounting principles generally accepted in their respective countries and which have
been audited by other auditors under generally accepted auditing standards applicable in their respective

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