Page 267 - CA Final PARAM Digital Book.

countries.
Where and how such information should be included in independent auditor’s report on consolidated
financial statements of company? Also draft a suitable para by making necessary assumptions.
Answer In a case where the parent‘s auditor is not the auditor of all the components included in the consolidated
financial statements, then as prescribed in SA 706, if the auditor considers it necessary to make reference to
the audit of the other auditors, the auditor’s report on the consolidated financial statements should disclose
clearly the magnitude of the portion of the financial statements audited by the other auditors. This may be
done by stating aggregate rupee amounts or percentages of total assets, revenues and cash flows of
components included in the consolidated financial statements not audited by the parent‘s auditor.

It should be included in Other Matter paragraph of independent auditor’s report. The draft “Other Matter
Paragraph” is as under: -

Other Matter Paragraph
We did not audit the financial statements and other financial information, in respect of eight (8)
subsidiaries, whose financial statements include total assets of Rs.1500 crores as at March 31, 2023, and
total revenues of Rs.1,000 crores and net cash outflow of Rs. 10 crores for the year ended on that date.
These financial statements and other financial information have been audited by other auditors and such
financial statements, other financial information and auditor’s reports have been furnished to us by the
management of the Holding Company.

Our opinion on the consolidated financial statements, in so far as it relates to the amounts and disclosures
included in respect of these subsidiaries and joint ventures, and our report in terms of sub-sections (3) of
Section 143 of the Act, in so far as it relates to the aforesaid subsidiaries is based solely on the reports of
such other auditors.

Two of these subsidiaries are located outside India whose financial statements and other financial
information 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 countries. The Holding Company’s management has converted the
financial statements of such subsidiaries from accounting principles generally accepted in their respective
countries to accounting principles generally accepted in India.
We have audited these conversion adjustments made by the Holding Company’s management. Our opinion
in so far as it relates to the balances and affairs of such subsidiaries is based on the report of other auditors
and the conversion adjustments prepared by the management of the Holding Company and audited by us.
Our opinion on the consolidated financial statements, and our report on Other Legal and Regulatory
Requirements is not modified in respect of the above matters with respect to our reliance on the work done
and the reports of the other auditors and the financial statements and other financial information certified
by the Management.

QNO Checking Completeness of the components in consolidation Old Course – (N20E, N21M, M23R)
443.050 TITANIUM CNO— GA.140 New Course—(SM23)
CA. Vimal is the auditor of Excellent Ltd., a parent company which presents Consolidated Financial
Statements. The management of Excellent Ltd. has provided the list of the components included in the
Consolidated Financial Statements. As an auditor of Consolidated Financial Statements, CA Vimal has to

verify that all the components have been included in the Consolidated Financial Statements and review
the information provided by the management in identifying the components. State the procedures to be
followed by CA. Vimal in respect of completeness of this information.
Answer A parent which presents consolidated financial statements is required to consolidate all its
components in the consolidated financial statements other than those for which exceptions have
been provided in the relevant accounting standards under the applicable financial reporting
framework.

The auditor should obtain a listing of all the components included in the consolidated financial
statements and review the information provided by the management of the parent identifying the
components. The auditor should verify that all the components have been included in the

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