Page 173 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
to be reflected in the summary financial statements so that they are consistent, in all material respects, with or
represent a fair summary of the audited financial statements.
2. Risk in Summary Financial Statements: Because summary financial statements, by their nature contain
aggregated information and limited disclosure, there is an increased risk that they may not contain the
information necessary so as not to be misleading in the circumstances. This risk increases when established
criteria for the preparation of summary financial statements do not exist.
3A. Factors Affecting Auditor’s Determination: (Shortcut: NPI Not misleading)
Factors affecting the auditor’s determination of the acceptability of the applied criteria include the Nature of the
entity, the Purpose of the summary financial statements, the Information needs of the intended users of the
summary financial statements, and whether the applied criteria will result in summary financial statements that
are Not misleading in the circumstances.
3B. Appropriate Title (So that not Misleading): Adequate disclosure of the summarised nature of the summary
financial statements and the identity of the audited financial statements, may be provided by a title such as
“Summary financial statements prepared from the audited financial statements for the year ended March 31,
20XX.”
Types of Criteria & Unacceptable Criteria.
1A. Recognised Criteria: The criteria for the preparation of summary financial statements may be established
by an authorised or recognised standards setting organisation or by law or regulation. Similar to the case of
financial statements, as explained in SA 210, in many such cases, the auditor may presume that such criteria are
acceptable.
1B. Criteria by Management: Where established criteria for the preparation of summary financial statements
do not exist, criteria may be developed by management, for example, based on practice in a particular industry.
2A. Unacceptable Criteria: If the auditor concludes that the applied criteria are unacceptable or is unable to
obtain the agreement of management, the auditor shall not accept the engagement to report on the summary
financial statements, unless required by law or regulation to do so.
2B. No reference to SA: An engagement conducted in accordance with such law or regulation does not comply
with this SA. Accordingly, the auditor’s report on the summary financial statements shall not indicate that the
engagement was conducted in accordance with this SA.
2C. Include in Engagement Letter: The auditor shall include appropriate reference to this fact in the terms of
the engagement. The auditor shall also determine the effect that this may have on the engagement to audit the
financial statements from which the summary financial statements are derived.
b) Obtain the agreement of management that it acknowledges and understands its responsibility:
1. Preparation: Obtain the agreement of management that it acknowledges and understands its responsibility
for the preparation of the summary financial statements in accordance with the applied criteria.
2. Availability of AFS: Management is also responsible to make the audited financial statements (AFS) available
to the intended users of the summary financial statements without undue difficulty.
2A. Requirement of Law or Regulation: If law or regulation provides that the audited financial statements
need not be made available to the intended users of the summary financial statements and establishes the criteria
for the preparation of the summary financial statements, management is responsible to describe that law or
regulation in the summary financial statements.
2B. Evaluation of Availability: The auditor’s evaluation whether the audited financial statements are available
to the intended users of the summary financial statements is affected by several factors given below:
• Description of Availability: These factors include whether the summary financial statements describe
clearly from whom or where the audited financial statements are available.
• Public Record: The factors also consider whether the audited financial statements are on public record.
• Ready Access: whether management has established a process for ready access to the audited financial
statements by the intended users.

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