Draft SA 710 Comparative Information -Corresponding Figures & Comparative Financial Statements

Exposure Draft of Standard on Auditing 710 Comparative Information -Corresponding Figures and Comparative Financial Statements

Introduction

Scope of this SA

1. This Standard on Auditing (SA) deals with the auditor’s responsibilities regarding comparative information in an audit of financial statements. When the financial statements of the prior period have been audited by a predecessor auditor or were not audited, the requirements and guidance in SA 5101 regarding opening balances also apply.

The Nature of Comparative Information

2. The nature of the comparative information that is presented in an entity’s financial statements depends on the requirements of the applicable financial reporting framework. There are two different broad approaches to the auditor’s reporting responsibilities in respect of such comparative information: corresponding figures and comparative financial statements2. The approach to be adopted is often specified by law or regulation but may also be specified in the terms of

3. The essential audit reporting differences between the approaches are:

(a) For corresponding figures, the auditor’s opinion on the financial statements refers to the current period only; whereas

(b) For comparative financial statements, the auditor’s opinion refers to each period for which financial statements are presented.

This SA addresses separately the auditor’s reporting requirements for each approach.

Effective Date

4. This SA is effective for audits of financial statements for periods beginning on or after ……..

Objectives

5. The objectives of the auditor are:

(a) To obtain sufficient appropriate audit evidence about whether the comparative information included in the financial statements has been presented, in all material respects, in accordance with the requirements for comparative information in the applicable financial reporting framework; and

(b) To report in accordance with the auditor’s reporting responsibilities.

Definitions

6. For purposes of the SAs, the following terms have the meanings attributed below:

(a) Comparative information – The amounts and disclosures included in the financial statements in respect of one or more prior periods in accordance with the applicable financial reporting framework.

(b) Corresponding figures – Comparative information where amounts and other disclosures for the prior period are included as an integral part of the current period financial statements, and are intended to be read only in relation to the amounts and other disclosures relating to the current period (referred to as “current period figures”). The level of detail presented in the corresponding amounts and disclosures is dictated primarily by its relevance to the current period figures.

(c) Comparative financial statements – Comparative information where amounts and other disclosures for the prior period are included for comparison with the financial statements of the current period but, if audited, are referred to in the auditor’s opinion. The level of information included in those comparative financial statements is comparable with that of the financial statements of the current period.

For purposes of this SA, references to “prior period” should be read as “prior periods” when the comparative information includes amounts and disclosures for more than one period.

Requirements

Audit Procedures

7. The auditor shall determine whether the financial statements include the comparative information required by the applicable financial reporting framework and whether such information is appropriately classified. For this purpose, the auditor shall evaluate whether:

(a) The comparative information agrees with the amounts and other disclosures presented in the prior period; and

(b) The accounting policies reflected in the comparative information are consistent with those applied in the current period or, if there have been changes in accounting policies, whether those changes have been properly accounted for and adequately presented and disclosed.

8. If the auditor becomes aware of a possible material misstatement in the comparative information while performing the current period audit, the auditor shall perform such additional audit procedures as are necessary in the circumstances to obtain sufficient appropriate audit evidence to determine whether a material misstatement exists. If the auditor had audited the prior period’s financial statements, the auditor shall also follow the relevant requirements of SA 5603.

9. As required by SA 5804, the auditor shall request written representations for all periods referred to in the auditor’s opinion. The auditor shall also obtain a specific written representation regarding any prior period item that is separately disclosed in the current year’s statement of profit and loss or regarding any restatement made to correct a material misstatement in prior period financial statements that affect the comparative information (refer applicable financial reporting framework).(Ref: A1)

Audit Reporting

Corresponding Figures

10. When corresponding figures are presented, the auditor’s opinion shall not refer to the corresponding figures except in the circumstances described in paragraphs 11, 12, and (Ref: Para. A2)

11. If the auditor’s report on the prior period, as previously issued, included a qualified opinion, a disclaimer of opinion, or an adverse opinion and the matter which gave rise to the modification is unresolved, the auditor shall modify the auditor’s opinion on the current period’s financial statements. In the Basis for Modification paragraph in the auditor’s report, the auditor shall either:

(a) Refer to both the current period’s figures and the corresponding figures in the description of the matter giving rise to the modification when the effects or possible effects of the matter on the current period’s figures are material; or

(b) In other cases, explain that the audit opinion has been modified because of the effects or possible effects of the unresolved matter on the comparability of the current period’s figures and the corresponding figures. (Ref: Para. A3-A5)

12. If the auditor obtains audit evidence that a material misstatement exists in the prior period financial statements on which an unmodified opinion has been previously issued, the auditor shall verify whether the misstatement has been dealt with as required under the applicable financial reporting framework and, if that is not the case, the auditor shall express a qualified opinion or an adverse opinion in the auditor’s report on the current period financial statements, modified with respect to the corresponding figures included therein. (Ref: Para. A6)

Prior Period Financial Statements Audited by a Predecessor Auditor

13. If the financial statements of the prior period were audited by a predecessor auditor and the auditor is permitted by law or regulation to refer to the predecessor auditor’s report on the corresponding figures and decides to do so, the auditor shall state in an Other Matter paragraph in the auditor’s report:

(a) That the financial statements of the prior period were audited by the predecessor auditor;

(b) The type of opinion expressed by the predecessor auditor and, if the opinion was modified, the reasons therefore; and

(c) The date of that (Ref: Para. A7)

Prior Period Financial Statements Not Audited

14. If the prior period financial statements were not audited, the auditor shall state in an Other Matter paragraph in the auditor’s report that the corresponding figures are unaudited. Such a statement does not, however, relieve the auditor of the requirement to obtain sufficient appropriate audit evidence that the opening balances do not contain misstatements that materially affect the current period’s financial statements5. (Ref: A7a, A8)

Comparative Financial Statements

15. When comparative financial statements are presented, the auditor’s opinion shall refer to each period for which financial statements are presented and on which an audit opinion is (Ref: Para. A9-A10)

16. When reporting on prior period financial statements in connection with the current period’s audit, if the auditor’s opinion on such prior period financial statements differs from the opinion the auditor previously expressed, the auditor shall disclose the substantive reasons for the different opinion in an Other Matter paragraph in accordance with SA 706(Revised)6. (Ref: A11)

Prior Period Financial Statements Audited by a Predecessor Auditor

17. If the financial statements of the prior period were audited by a predecessor auditor, in addition to expressing an opinion on the current period’s financial statements, the auditor shall state in an Other Matter paragraph:

(a) That the financial statements of the prior period were audited by a predecessor auditor;

(b) The type of opinion expressed by the predecessor auditor and, if the opinion was modified, the reasons therefore; and

(c) The date of that report,

unless the predecessor auditor’s report on the prior period’s financial statements is revised with the financial statements.

18. If the auditor concludes that a material misstatement exists that affects the prior period financial statements on which the predecessor auditor had previously reported without modification, the auditor shall communicate the misstatement with the appropriate level of management and those charged with governance and request that the predecessor auditor be informed. If the prior period financial statements are amended, and the predecessor auditor agrees to issue a new auditor’s report on the amended financial statements of the prior period, the auditor shall report only on the current (Ref: Para. A12)

Prior Period Financial Statements Not Audited

19. If the prior period financial statements were not audited, the auditor shall state in an Other Matter paragraph that the comparative financial statements are Such a statement does not, however, relieve the auditor of the requirement to obtain sufficient appropriate audit evidence that the opening balances do not contain misstatements that materially affect the current period’s financial statements7.(Ref: Para. A13)

***

Application and Other Explanatory Material

Audit Procedures

Written Representations (Ref: Para. 9)

A1. In the case of comparative financial statements, the written representations are requested for all periods referred to in the auditor’s opinion because management needs to re-affirm that the written representations it previously made with respect to the prior period remain appropriate. In the case of corresponding figures, the written representations are requested for the financial statements of the current period only because the auditor’s opinion is on those financial statements, which include the corresponding figures. However, the auditor requests a specific written representation regarding any prior period item that is separately disclosed in the current year’s statement of profit and loss or regarding any restatement made to correct a material misstatement in the prior period financial statements that affect the comparative information (refer applicable financial reporting framework).

Audit Reporting

Corresponding Figures

No Reference in Auditor’s Opinion (Ref: Para.10)

A2. The auditor’s opinion does not refer to the corresponding figures because the auditor’s opinion is on the current period financial statements as a whole, including the corresponding figures.

Modification in Auditor’s Report on the Prior Period Unresolved (Ref: Para. 11)

A3. When the auditor’s report on the prior period, as previously issued, included a qualified opinion, a disclaimer of opinion, or an adverse opinion and the matter which gave rise to the modified opinion is resolved and properly accounted for or disclosed in the financial statements in accordance with the applicable financial reporting framework, the auditor’s opinion on the current period need not refer to the previous modification.

A4. When the auditor’s opinion on the prior period, as previously expressed, was modified, the unresolved matter that gave rise to the modification may not be relevant to the current period figures. Nevertheless, a qualified opinion, a disclaimer of opinion, or an adverse opinion (as applicable) may be required on the current period’s financial statements because of the effects or possible effects of the unresolved matter on the comparability of the current and corresponding figures.

A5. Illustrative examples of the auditor’s report if the auditor’s report on the prior period included a modified opinion and the matter giving rise to the modification is unresolved are contained in Illustrations 1 and 2 of the Appendix.

Misstatement in Prior Period Financial Statements (Ref: Para. 12)

A6. When the prior period financial statements that are misstated have not been amended and an auditor’s report thereon has not been issued in accordance with the requirements of SA 560, “Subsequent Events”, but the corresponding figures have been properly dealt with as required under the applicable financial reporting framework and the appropriate disclosures have been made in the current period financial statements, the auditor’s report may include an Emphasis of Matter paragraph describing the circumstances and referring to, where relevant, disclosures that fully describe the matter that can be found in the financial statements (see SA 706(Revised)).

Prior Period Financial Statements Audited by a Predecessor Auditor (Ref: Para. 13)

A7. An illustrative example of the auditor’s report if the prior period financial statements were audited by a predecessor auditor and the auditor is permitted by law or regulation to refer to the predecessor auditor’s report on the corresponding figures is contained in Illustration 3 of the Appendix.

Prior Period Financial Statements Not Audited (Ref: Para.14)

A7a. Where prior period financial statements were not audited, the auditor should request the management to disclose this fact on the face of the current period financial statements with respect to the corresponding figures.

A8. If the auditor is unable to obtain sufficient appropriate audit evidence regarding the opening balances, the auditor is required by SA 705 (Revised)8 to express a qualified opinion or disclaim an opinion on the financial statements, as appropriate, in accordance with SA 705 (Revised). If the auditor encountered significant difficulty in obtaining sufficient appropriate audit evidence that the opening balances do not contain misstatements that materially affect the current period’s financial statements, the auditor may determine this to be a key audit matter in accordance with SA 701⁹.

Comparative Financial Statements

Reference in Auditor’s Opinion (Ref: Para. 15)

A9. Because the auditor’s report on comparative financial statements applies to the financial statements for each of the periods presented, the auditor may express a qualified opinion or an adverse opinion, disclaim an opinion, or include an Emphasis of Matter paragraph with respect to one or more periods, while expressing a different auditor’s opinion on the financial statements of the other period.

A10. An illustrative example of the auditor’s report if the auditor is required to report on both the current and the prior period financial statements in connection with the current year’s audit and the prior period included a modified opinion and the matter giving rise to the modification is unresolved, is contained in Illustration 4 of the Appendix.

Opinion on Prior Period Financial Statements Different from Previous Opinion (Ref: Para. 16)

A11. When reporting on the prior period financial statements in connection with the current period’s audit, the opinion expressed on the prior period financial statements may be different from the opinion previously expressed if the auditor becomes aware of circumstances or events that materially affect the financial statements of a prior period during the course of the audit of the current period. In some circumstances, the auditor may have additional reporting responsibilities designed to prevent future reliance on the auditor’s previously issued report on the prior period financial statements.

Prior Period Financial Statements Audited by a Predecessor Auditor (Ref: Para. 18)

A12. The predecessor auditor may be unable or unwilling to revise the auditor’s report on the prior period financial statements. An Other Matter paragraph of the auditor’s report may indicate that the predecessor auditor reported on the financial statements of the prior period before amendment. In addition, if the auditor is engaged to audit and obtains sufficient appropriate audit evidence to be satisfied as to the appropriateness of the amendment, the auditor’s report may also include the following paragraph:

As part of our audit of the 20X2 financial statements, we also audited the adjustments described in Note X that were applied to amend the 20X1 financial statements. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 20X1 financial statements of the company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 20X1 financial statements taken as a whole.

Prior Period Financial Statements Not Audited (Ref: Para. 19)

A13. If the auditor is unable to obtain sufficient appropriate audit evidence regarding the opening balances, the auditor is required by SA 705(Revised) to express a qualified opinion or disclaim an opinion on the financial statements, as appropriate, in accordance with SA 705(Revised). If the auditor encountered significant difficulty in obtaining sufficient appropriate audit evidence that the opening balances do not contain misstatements that materially affect the current period’s financial statements, the auditor may determine this to be a key audit matter in accordance with SA 701.

Appendix10

(Ref: Para. A5, A7, A10)

Illustrations of Independent Auditor’s Reports

Illustration 1- Corresponding Figures

For purposes of this illustrative auditor’s report, the following circumstances are assumed:

• Audit of a complete set of financial statements of an unlisted company (registered under the Companies Act, 2013) using a fair presentation The audit is not a group audit (i.e., SA 600 does not apply).
• The financial statements are prepared by management of the company in accordance with the accounting Standards notified under the Companies Act, 2013.
• The terms of the audit engagement reflect the description of management’s responsibility for the financial statements in SA 210.
• The auditor’s report on the prior period, as previously issued, included a qualified opinion.
• The matter giving rise to the modification is unresolved.
• The effects or possible effects of the matter on the current period’s figures are material and require a modification to the auditor’s opinion regarding the current period figures.
• The relevant ethical requirements that apply to the audit comprise the Code of Ethics issued by ICAI together with the other relevant ethical requirements relating to the audit and the auditor refers to both.
• Based on the audit evidence obtained, the auditor has concluded that a material uncertainty does not exist related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern in accordance with SA 570(Revised).
• The auditor is not required, and has otherwise not decided, to communicate key audit matters in accordance with SA 701.
• The auditor has not obtained any other information prior to the date of the auditor’s report.
• Those responsible for oversight of the financial statements differ from those responsible for the preparation of the financial statements.
• In addition to the audit of the financial statements, the auditor has other reporting responsibilities required under the Companies Act, 2013.

INDEPENDENT AUDITOR’S REPORT

To the Members of ABC Company Limited

Report on the Audit of the Standalone Financial Statements

Qualified Opinion

We have audited the standalone financial statements of ABC Company Limited (“the Company”), which comprise the balance sheet as at March 31, 20X1, and the statement of profit and loss,(statement of changes in equity)11 and statement of cash flows12 for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information [in which are included the Returns for the year ended on that date audited by the branch auditors of the Company’s branches located at (location of branches)]¹³ .

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the ‘Basis for Qualified Opinion’ section of our report, the accompanying financial statements give the information required by the Companies Act, 2013 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 20XX, and its profit/loss, (changes in equity)¹⁴ and its cash flows15 for the year ended on that date.

Basis for Qualified Opinion

As discussed in Note X to the financial statements, no depreciation has been provided in the financial statements which constitutes a departure from the Accounting Standards notified under the Companies Act, 2013. This is the result of a decision taken by management at the start of the preceding financial year and caused us to qualify our audit opinion on the financial statements relating to that year. Based on the straight-line method of depreciation and annual rates of 5% for the building and 20% for the equipment, the loss for the year should be increased by Rs. XXX in 20X1 and Rs. XXX in 20X0, property, plant and equipment should be reduced by accumulated depreciation of Rs. XXX in 20X1 and Rs. XXX in 20X0, and the accumulated loss should be increased by Rs. XXX in 20X1 and Rs. XXX in 20X0.

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Companies Act, 2013 and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

[Reporting in accordance with SA 700(Revised) – see illustration 3 in SA 700(Revised)]

Auditor’s Responsibilities for the Audit of the Financial Statements

[Reporting in accordance with SA 700(Revised) – see illustration 3 in SA 700(Revised)]

Other Matter

We did not audit the financial statements/ information of …(number) branches included in the standalone financial statements of the company whose financial statements/financial information reflect total assets of Rs. ……as at 31st March 20XX and the total revenue of Rs. for the year ended on that date, as considered in the standalone financial statements. The financial statements/information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of branches, is based solely on the report of such branch auditors.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements16

[Reporting in accordance with SA 700(Revised) – see illustration 3 in SA 700(Revised)]

While reporting under Section 143(3) of the Companies Act, 2013, the auditor is required to suitably reword the wordings given in the Illustration in SA 700(Revised) to meet the circumstances of the audit.

 For XYZ and
Co. Chartered Accountants
Firm’s Registration Number

Signature
(Name of the Member Signing the Auditor’s Report)
(Designation17)
(Membership Number)
UDIN

Place of Signature

Date

Illustration 2- Corresponding Figures

For purposes of this illustrative auditor’s report, the following circumstances are assumed:

• Audit of a complete set of financial statements of an unlisted company (registered under the Companies Act, 2013) using a fair presentation The audit is not a group audit (i.e., SA 600 does not apply).
• The financial statements are prepared by management of the company in accordance with the accounting Standards notified under the Companies Act, 2013.
• The terms of the audit engagement reflect the description of management’s responsibility for the financial statements in SA 210.
• The auditor’s report on the prior period, as previously issued, included a qualified opinion.
• The matter giving rise to the modification is unresolved.
• The effects or possible effects of the matter on the current period’s figures are immaterial but require a modification to the auditor’s opinion because of the effects or possible effects of the unresolved matter on the comparability of the current period’s figures and the corresponding figures.
• The relevant ethical requirements that apply to the audit comprise the Code of Ethics issued by ICAI together with the other relevant ethical requirements relating to the audit and the auditor refers to both.
• Based on the audit evidence obtained, the auditor has concluded that a material uncertainty does not exist related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern in accordance with SA 570(Revised).
• The auditor is not required, and has otherwise not decided, to communicate key audit matters in accordance with SA 701.
• The auditor has not obtained any other information prior to the date of the auditor’s report.
• Those responsible for oversight of the financial statements differ from those responsible for the preparation of the financial statements.
• In addition to the audit of the financial statements, the auditor has other reporting responsibilities required under the Companies Act, 2013.

INDEPENDENT AUDITOR’S REPORT

To the Members of ABC Company Limited

Report on the Audit of the Standalone Financial Statements

Qualified opinion

We have audited the standalone financial statements of ABC Company Limited (“the Company”), which comprise the balance sheet as at March 31, 20X1, and the statement of profit and loss, (statement of changes in equity)18 and statement of cash flows19 for the year then ended, and notes to the financial statements including a summary of significant accounting policies and other explanatory information [in which are included the Returns for the year ended on that date audited by the branch auditors of the Company’s branches located at (location of branches)]20 .

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects on the corresponding figures of the matter described in the Basis for Qualified Opinion section of our report, the accompanying financial statements give the information required by the Companies Act, 2013 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 20XX, and its profit/loss, (changes in equity)21 and its cash flows22 for the year ended on that date.

Basis for Qualified Opinion

Because we were appointed auditors of the Company during 20X0, we were not able to observe the counting of the physical inventories at the beginning of that period or satisfy ourselves concerning those inventory quantities by alternative means. Since opening inventories affect the determination of the results of operations, we were unable to determine whether adjustments to the results of operations and opening retained earnings might be necessary for 20X0. Our audit opinion on the financial statements for the year ended 31 March, 20X0 was modified accordingly. Our opinion on the current period’s financial statements is also modified because of the possible effect of this matter on the comparability of the current period’s figures and the corresponding figures.

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Companies Act, 2013 and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

[Reporting in accordance with SA 700(Revised) – see illustration 3 in SA 700(Revised)]

Auditor’s Responsibilities for the Audit of the Financial Statements

[Reporting in accordance with SA 700(Revised) – see illustration 3 in SA 700(Revised)]

Other Matter

We did not audit the financial statements/ information of …(number) branches included in the standalone financial statements of the company whose financial statements/financial information reflect total assets of Rs. ……as at 31st March 20XX and the total revenue of Rs. for the year ended on that date, as considered in the standalone financial statements. The financial statements/information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of branches, is based solely on the report of such branch auditors.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements23

[Reporting in accordance with SA 700(Revised) – see illustration 3 in SA 700(Revised)]

While reporting under Section 143(3) of the Companies Act, 2013, the auditor is required to suitably reword the wordings given in the Illustration in SA 700(Revised) to meet the circumstances of the audit.

 For XYZ and
Co. Chartered Accountants
Firm’s Registration Number

Signature
(Name of the Member Signing the Auditor’s Report)
(Designation24)
(Membership Number)
UDIN

Place of Signature: Date:

Illustration 3- Corresponding Figures

For purposes of this illustrative auditor’s report, the following circumstances are assumed:

• Audit of a complete set of financial statements of an unlisted company (registered under the Companies Act, 2013) using a fair presentation The audit is not a group audit (i.e., SA 600 does not apply).
• The financial statements are prepared by management of the company in accordance with the accounting Standards notified under the Companies Act, 2013.
• The terms of the audit engagement reflect the description of management’s responsibility for the financial statements in SA 210.
• The auditor has concluded an unmodified (i.e. clean) opinion is appropriate based on the audit evidence obtained.
• Corresponding figures are presented, and the prior period’s financial statements were audited by a predecessor auditor.
• The auditor is permitted by law or regulation to refer to the predecessor auditor’s report on the corresponding figures and decides to do so.
• The relevant ethical requirements that apply to the audit comprise the Code of Ethics issued by ICAI together with the other relevant ethical requirements relating to the audit and the auditor refers to both.
• Based on the audit evidence obtained, the auditor has concluded that a material uncertainty does not exist related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern in accordance with SA 570 (Revised).
• The auditor is not required, and has otherwise not decided, to communicate key audit matters in accordance with SA 710.
• The auditor has not obtained any other information prior to the date of the auditor’s report.
• Those responsible for oversight of the financial statements differ from those responsible for the preparation of the financial statements.
• In addition to the audit of the financial statements, the auditor has other reporting responsibilities required under the Companies Act, 2013.

INDEPENDENT AUDITOR’S REPORT

To the Members of ABC Company Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the standalone financial statements of ABC Company Limited (“the Company”), which comprise the balance sheet as at March 31, 20X1, and the statement of profit and loss, (statement of changes in equity)25 and statement of cash flows26 for the year then ended, and notes to the financial statements including a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, the accompanying financial statements give the information required by the Companies Act, 2013 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 20XX, and its profit/loss, (changes in equity)27 and its cash flows28 for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Companies Act, 2013 and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Matter

The financial statements of the Company for the year ended March 31, 20X0, were audited by another auditor who expressed an unmodified opinion on those statements on June 30, 20X0.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

[Reporting in accordance with SA 700(Revised) – see illustration 3 in SA 700(Revised)]

Auditor’s Responsibilities for the Audit of the Financial Statements

[Reporting in accordance with SA 700(Revised) – see illustration 3 in SA 700(Revised)]

Report on Other Legal and Regulatory Requirements29

[Reporting in accordance with SA 700(Revised) – see illustration 3 in SA 700(Revised)]

While reporting under Section 143(3) of the Companies Act, 2013, the auditor is required to suitably reword the wordings given in the Illustration in SA 700(Revised) to meet the circumstances of the audit.

For XYZ and
Co. Chartered Accountants
Firm’s Registration Number

Signature
(Name of the Member Signing the Auditor’s Report)
(Designation30)
(Membership Number)
UDIN

Place of Signature Date

Illustration 4: Comparative Financial Statements

For purposes of this illustrative auditor’s report, the following circumstances are assumed:

• Audit of a complete set of financial statements of an unlisted company (registered under the Companies Act, 2013) using a fair presentation The audit is not a group audit (i.e., SA 600 does not apply).
• The financial statements are prepared by management of the company in accordance with the accounting Standards notified under the Companies Act, 20113.
• The terms of the audit engagement reflect the description of management’s responsibility for the financial statements in SA 210.
• The auditor is required to report on both the current period financial statements and the prior period financial statements in connection with the current year’s audit.
• The auditor’s report on the prior period, as previously issued, included a qualified opinion.
• The matter giving rise to the modification is unresolved.
• The effects or possible effects of the matter on the current period’s figures are material to both the current period financial statements and prior period financial statements and require a modification to the auditor’s opinion.
• The relevant ethical requirements that apply to the audit comprise the Code of Ethics issued by ICAI together with the other relevant ethical requirements relating to the audit and the auditor refers to both.
• Based on the audit evidence obtained, the auditor has concluded that a material uncertainty does not exist related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern in accordance with SA 570(Revised).
• The auditor is not required, and has otherwise not decided, to communicate key audit matters in accordance with SA 701
• The auditor has not obtained any other information prior to the date of the auditor’s report.
• Those responsible for oversight of the financial statements differ from those responsible for the preparation of the financial statements.
• In addition to the audit of the financial statements, the auditor has other reporting responsibilities required under the Companies Act, 2013

INDEPENDENT AUDITOR’S REPORT

To the Members of ABC Company Limited

Report on the Audit of the Standalone Financial Statements

Qualified Opinion

We have audited the standalone financial statements of ABC Company Limited (“the Company”), which comprise the balance sheets as at March 31, 20X1 and March 31, 20X0, and the statements of profit & loss, (statements of changes in equity)³¹ and statements of cash flows32 for the years then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion section of our report, the accompanying financial statements give the information required by the Companies Act, 2013 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 20X1 and March 31, 20X0, and its profit/loss,

(changes in equity)³³ and its cash flows34 for the years ended on that date.

Basis for Qualified Opinion

As discussed in Note X to the financial statements, no depreciation has been provided in the financial statements which constitutes a departure from the Accounting Standards notified under the Companies Act, 2013. Based on the straight-line method of depreciation and annual rates of 5% for the building and 20% for the equipment, the loss for the year should be increased by Rs. XXX in 20X1 and Rs. XXX in 20X0, property, plant and equipment should be reduced by accumulated depreciation of Rs. XXX in 20X1 and Rs. XXX in 20X0, and the accumulated loss should be increased by Rs. XXX in 20X1 and Rs. XXX in 20X0. We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Companies Act, 2013 and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

[Reporting in accordance with SA 700(Revised) – see illustration 3 in SA 700(Revised)]

Auditor’s Responsibilities for the Audit of the Financial Statements

[Reporting in accordance with SA 700(Revised) – see illustration 3 in SA 700(Revised)]

Report on Other Legal and Regulatory Requirements35

[Reporting in accordance with SA 700(Revised) – see illustration 3 in SA 700(Revised)]

While reporting under Section 143(3) of the Companies Act, 2013, the auditor is required to suitably reword the wordings given in the Illustration in SA 700(Revised) to meet the circumstances of the audit.

For XYZ and
Co. Chartered Accountants
Firm’s Registration Number

Signature
(Name of the Member Signing the Auditor’s Report)
(Designation36)
(Membership Number)
UDIN

Place of Signature

Date

Notes: 

¹ SA 510, “Initial Audit Engagements—Opening Balances”.

² For general purpose financial statements under the Accounting Standards (AS) reporting framework, the corresponding figures approach is followed and under the Indian Accounting Standards (Ind AS) reporting framework, the comparative financial statements approach is followed.

³ SA 560, “Subsequent Events”, paragraphs 14-17.

⁴ SA 580, “Written Representations”, paragraph 14.

⁵ SA 510, paragraph 6.

⁶ SA 706(Revised),  “Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report”, paragraph 10.

⁷ SA 510, paragraph 6.

⁸ SA 705 (Revised), Modifications to the Opinion in the Independent Auditor’s Report.

⁹ SA 701, Communicating Key Audit Matters in the Independent Auditor’s Report.

¹⁰ It may be noted that auditor’s report formats are illustrative in nature and necessary changes may be made as per the facts and circumstances of the audit for example due to changes in applicable financial reporting framework, applicable laws and regulations, pronouncements issued by ICAI.

¹¹ Where applicable.

¹² Where applicable.

¹³Where applicable.

¹⁴ Where applicable.

¹⁵ Where applicable.

¹⁶ Auditor should also include, wherever applicable, reporting on Section 197(16) of the Companies Act 2013, reporting on Section 143(3)(f), Section 143(3)(h) of the Companies Act, 2013, reporting on new reporting requirements under Rule 11 of the Companies (Audit and Auditors) Rules, 2014 prescribed by the Companies (Audit and Auditors) Amendment Rules dated 24th March 2021 and other reporting requirements as may be prescribed from time to time under the provisions of the Companies Act, 2013 and Rules thereunder.

¹⁷ Partner or Proprietor, as the case may be.

¹⁸ Where applicable.

¹⁹ Where applicable.

²⁰ Where applicable.

²¹ Where applicable.

²² Where applicable.

²³ Auditor should also include, wherever applicable, reporting on Section 197(16) of the Companies Act 2013, reporting on Section 143(3)(f), Section 143(3)(h) of the Companies Act, 2013, reporting on new reporting requirements under Rule 11 of the Companies (Audit and Auditors) Rules, 2014 prescribed by the Companies (Audit and Auditors) Amendment Rules dated 24th March 2021 and other reporting requirements as may be prescribed from time to time under the provisions of the Companies Act, 2013 and Rules thereunder.

²⁴ Partner or Proprietor, as the case may be.

²⁵ Where applicable.

²⁶ Where applicable.

²⁷ Where applicable.

²⁸ Where applicable.

²⁹ Auditor should also include, wherever applicable, reporting on Section 197(16) of the Companies Act 2013, reporting on Section 143(3)(f), Section 143(3)(h) of the Companies Act, 2013, reporting on new reporting requirements under Rule 11 of the Companies (Audit and Auditors) Rules, 2014 prescribed by the Companies (Audit and Auditors) Amendment Rules dated 24th March 2021 and other reporting requirements as may be prescribed from time to time under the provisions of the Companies Act, 2013 and Rules thereunder.

³⁰ Partner or Proprietor, as the case may be.

³¹ Where applicable.

³² Where applicable.

³³ Where applicable.

³⁴ Where applicable.

35 Auditor should also include, wherever applicable, reporting on Section 197(16) of the Companies Act 2013, reporting on Section 143(3)(f), Section 143(3)(h) of the Companies Act, 2013, reporting on new reporting requirements under Rule 11 of the Companies (Audit and Auditors) Rules, 2014 prescribed by the Companies (Audit and Auditors) Amendment Rules dated 24th March 2021 and other reporting requirements as may be prescribed from time to time under the provisions of the Companies Act, 2013 and Rules thereunder.

³⁶ Partner or Proprietor, as the case may be.