Page 248 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
When an auditor accepts the audit of consolidated financial statements, the auditor should assess whether based
on his work alone he would be able to express an opinion on the true and fair view presented by the consolidated
financial statements.
If the auditor is of the view that his own participation may not be enough or sufficient, he should consider using
the work of ‘other auditors’.
Such ‘other auditors’ might be the statutory auditors of the separate financial statements of one or more of the
components or the auditors appointed specifically for assisting the auditor of the consolidated financial
statements (the principal auditor).
Where the statutory auditors of one or more of the components of the parent are also requested to assist the
principal auditor, the work to be performed by such statutory auditors for use by the principal auditor would
constitute an assignment separate from the assignment to conduct the statutory audit of the respective
component.
Component Auditors: The auditor of the consolidated financial statements may use the work of other auditors
as per requirement of Standards on Auditing unless the auditor of consolidated financial statements is also the
auditor of the other components of the group.
Harmonisation & Different B/S date: The ‘other financial information’ would include disclosures to be made
in the consolidated financial statements about the components, proportion of items included in the consolidated
financial statements to which different accounting policies have been applied where permitted, adjustments
made for the effects of significant transactions or other events that occur between the financial statements of
parent and its components, as the case may be, etc.

(CNO GA.120) Role of SA 600 & GN on Consolidation.

Applicability of SA 600: Standard on Auditing (SA) 600 pertains to the use of another auditor's work when
reporting on an entity's financial statements, especially in consolidated financial statements. If the principal
auditor chooses to use another auditor's work for the consolidated audit, they must adhere to the requirements
of SA 600.
1A. Materiality for Standalone Financial Statements:
In carrying out the audit of the standalone financial statements, the computation of materiality for the purpose
of issuing an opinion on the standalone financial statements of each component would be done component-wise
on a standalone basis.
• The principal auditor may computes the materiality for each component and communicates to the component
auditor, if he believes is required for a true and fair view on CFS.
1B. Materiality for group FST:
When determining materiality during the audit of consolidated financial statements, the auditor must calculate
materiality for the entire group.
1C. Use of Group Materiality:
• The parent auditor can also use the materiality computed on the group level to determine whether the
component's financial statements are material to the group to determine whether they should scope in additional
components and consider using the work of other auditors as applicable.
• This materiality should be used to assess the appropriateness of the consolidation adjustments (i.e. permanent
consolidation adjustments and current period consolidation adjustments) that are made by the management in
the preparation of CFS.
2A. Confirmations from Component Auditors:
• The principal auditor also obtains certain confirmations from component auditors like independence, code of
ethics, certain information required for consolidation and disclosure requirements etc.
3. Modifications/EMP:
However, while considering the observations (for instance modification and /or emphasis of matter in
accordance with SA 705/706) of the component auditor in his report on the standalone financial statements, the
principles of SA 600 need to be considered.

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