Page 245 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

13 GROUP AUDITS

Case Study
Consolidation Requirement:
- CA. Vikram, a statutory auditor, is auditing a manufacturing company adhering to Ind AS.
- The company has acquired all shares of a U.S.-based company, creating a need for consolidated financial
statements under Section 129 of the Companies Act and Ind AS 110.
Scope of Consolidation:
- Ind AS 110 mandates the consolidation of all subsidiaries, both domestic and foreign.
Timing of Consolidation:
- Financial statements should include the subsidiary's operations from the date the parent gained control.
Audit Dilemma:
- The foreign subsidiary's accounts are unaudited.
- Vikram needs to decide how to proceed and understand the implications for the group financial statements.
Advice to Management:
- Vikram informed the company's management about the consolidation requirements and guided them through
the process.
Audit Considerations:
- While auditing the consolidated financial statements, Vikram must address the unaudited status of the foreign
subsidiary's accounts and assess the related implications and risks.

(CNO GA.020) Introduction
Definition: Consolidated Financial Statements are the financial statements of a group in which the assets,
liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as those of a
single economic entity. In other words, consolidated financial statements present the financial position of an
entire group including the parent and its group companies. Whereas separate financial statements present the
financial position of a single entity for which the financial statements are prepared.

(CNO GA.040) Consolidation of Financial Statements - Mandatory under Companies Act, 2013
Section 129(3) - Companies Act, 2013:
According to Section 129(3) of the Companies Act, 2013, where a company has one or more subsidiaries,
including associate company and joint venture, it shall, in addition to its own financial statements prepare a
consolidated financial statement of the company and of all the subsidiaries in the same form and manner as that
of its own.
Section 129(4) - Companies Act, 2013:
Further, section 129(4) of the said Act, provides that the provisions applicable to the preparation, adoption and
audit of the financial statements of a holding company shall, mutatis mutandis, also apply to its the consolidated
financial statements.
Companies (Accounts) Rules, 2014:
According to the Companies (Accounts) Rules, 2014, the consolidation of financial statements of the company
shall be made in accordance with the provisions of Schedule III to the Act and the applicable accounting
standards.
Compliance with Schedule III:
However, a company which is not required to prepare consolidated financial statements under the Accounting
Standards, it shall be sufficient if the company complies with provisions of consolidated financial statements
provided in Schedule III of the Act.
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