Page 148 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

Unaudited Statements: If the financial statements of the previous period were not audited, the current auditor
should include a separate paragraph in their audit report stating that the corresponding figures are unaudited.
However, this does not relieve the auditor from their responsibility of obtaining sufficient appropriate audit
evidence to ensure that the opening balances do not contain material misstatements that would affect the current
period's financial statements.

SA 720 - The Auditor’s Responsibilities Relating to Other Information

(CNO - SA 720.020) Introduction.
This Standard on Auditing (SA): pertains to the auditor's responsibilities regarding other information, which
can be financial or non-financial, included in an entity's annual report. The annual report may be a single
document or a combination of documents serving the same purpose.
Auditor's Responsibilities: The auditor is required to read and consider the other information because
inconsistencies with the financial statements or the knowledge obtained during the audit may indicate potential
material misstatements in the financial statements or the other information. Such inconsistencies can undermine
the credibility of the financial statements and the auditor's report.
Reason (Potential Impact of Material Misstatements): Material misstatements in the other information can
inappropriately influence the economic decisions of the users of the auditor's report, affecting their trust in the
financial statements.
Exclusions from SA 720: This SA does not apply to preliminary announcements of financial information or
securities offering documents, including prospectuses.

(CNO - SA 720.040) Important Definition:

Annual Report Definition: An annual report is a document or combination of documents prepared typically
annually by management or those charged with governance, as mandated by law, regulation, or custom. Its
purpose is to inform owners or similar stakeholders about the entity's operations, financial results, and financial
position as detailed in the financial statements.
Contents of an Annual Report: The annual report contains or accompanies the financial statements and the
auditor's report on them. It usually encompasses information on the entity's developments, future outlook, risks
and uncertainties, a statement from the entity's governing body, and governance matters reports.
Other Information Definition: Other information refers to the financial or non-financial information,
excluding the financial statements and the auditor's report on them, that is included in an entity's annual report.

(CNO - SA 720.060) Objective
Material Inconsistency with Financial Statements:
(a) To consider whether there is a material inconsistency between the other information and the financial
statements;

Material Inconsistency with Auditor’s Knowledge:
(b) To consider whether there is a material inconsistency between the other information and the auditor’s
knowledge obtained in the audit;
Response to Material Inconsistencies:
(c) To respond appropriately when the auditor identifies that such material inconsistencies appear to exist, or
when the auditor otherwise becomes aware that other information appears to be materially misstated;
Report in Accordance with SA:
(d) To report in accordance with this SA.

www.auditguru.in 07.22