Important Clarification on Amendment to Paragraph 17 of Revised Guidance Note on Audit of Consolidated Financial Statements – (25-05-2017)

I. The Council of ICAI at its 365th meeting held on May 17-19, 2017 considered a matter regarding amendment to paragraph 17 of Revised Guidance Note on Audit of Consolidated Financial Statements issued in October 2016. At the meeting, the Council noted that the members had expressed concerns regarding the 3rd bullet point of Paragraph 17 of Guidance Note (text given below) and requested that the guidance given therein needs to be clarified.

  • “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 concept of materiality would not be considered. Thus, the component auditor’s observations, if any, on the component’s financial statements, irrespective of whether the auditors of the component are also the auditors of the CFS or not, are required to be included in the parent auditor’s report on the CFS, regardless of materiality. (Refer paragraph 46 of this Guidance Note)”

II. After detailed deliberations, the Council concluded that the 3rd bullet of Paragraph 17 of the Guidance Note requires to be amended to clarify that the intent of the Guidance Note was also to ensure compliance of SA 600 in such matter. Accordingly, the Council decided to amend the aforesaid 3rd bullet in the following manner:

While considering the observations (for instance modification and/ or emphasis of matter/ other matter in accordance with SA 705/ 706) of the component auditor in his report on the standalone financial statements, the parent auditor should comply with the requirements of SA 600, “Using the Work of Another Auditor”.

This is for information and compliance to all concerned.

Issued under the authority of the Council of ICAI.

Chairman,
Auditing and Assurance Standard Board

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Tags : Companies Act (1867) Companies Act 2013 (1640) ICAI (2159) Statutory Audit (107)

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