Advanced Auditing, Assurance and Professional Ethics · Reporting

Reporting on More Than One Set of Financial Statements (SA 700)

Updated 5 October 2026

When an entity has more than one set of financial statements under different frameworks, the auditor checks each framework is acceptable and may issue a separate report on each set, often with an Other Matter paragraph. Supplementary information must be clearly differentiated; if management will not fix it, the auditor explains in the report why it is unacceptable.

Understand Reporting on More Than One Set of Financial Statements

An entity sometimes prepares two sets of financial statements for the same period. A common case is one set under Ind AS for statutory purposes and another set under a different general purpose framework, such as IFRS, for a foreign parent or lender. The management may ask the auditor to report on both.

The auditor treats each set as a separate engagement outcome. The auditor must first decide whether the framework used for each set is acceptable in the circumstances. Then the auditor forms an opinion on each set and reports on each one on its own facts. The opinions can differ. One report may be unmodified and the other modified.

SA 700 (Revised) allows the auditor to issue separate reports on each set. It does not require them. Where the auditor has reported on both sets, an Other Matter paragraph under SA 706 (Revised) may be added to tell readers that another set exists and that a separate report has been issued on it. This helps users who might otherwise assume the report covers everything.

The second issue is supplementary information. This is information presented with the financial statements that the framework does not require. Examples are extra ratios, a value-added statement or a segment analysis beyond the framework. The auditor must decide if it is clearly differentiated from the audited financial statements. This is the first test. It decides whether the information sits outside the audited statements or is read as part of them. If it is not clearly differentiated, readers may think it is audited when it is not.

If it is not clearly differentiated, the auditor asks management to change the presentation. If management refuses, the auditor explains in the auditor's report why the supplementary information is unacceptable. Supplementary information that is not clearly differentiated, and that management will not change, is treated as part of the audited financial statements and is covered by the audit opinion.

Some supplementary information is integral to the financial statements because of its nature. It cannot be differentiated from them, so it is covered by the audit opinion.

Key rules to remember

Acceptability first: Each set of FS: framework acceptable? → opinion on that set; Judge each framework on its own. Do not assume that because one set is acceptable the other is too.
Separate reports for separate sets: One set of FS = one auditor's report (opinion on that set only), where the auditor chooses to issue separate reports; SA 700 (Revised) permits separate reports on each set; it does not mandate them. Each report can have a different opinion. A modification in one report does not automatically carry into the other.
Other Matter paragraph link: Report on Set A + Other Matter paragraph (SA 706) → refers to Set B and the report on it; Use it when the auditor has also reported on the other set and wants users to know.
Supplementary information test: Not required by framework + presented with FS → clearly differentiated?; If yes, it stays outside the audit opinion. If no, the auditor asks management to change the presentation. If management will not change it, the information is treated as part of the audited FS and is covered by the opinion.
If management refuses to change: Not clearly differentiated + refusal → auditor explains in the auditor's report why the supplementary information is unacceptable; information treated as part of audited FS; The auditor first asks management to change the presentation. If management refuses, the auditor's report explains why the supplementary information is unacceptable, and the information is treated as part of the audited FS and covered by the opinion.
Integral information: Integral to the FS by its nature → cannot be differentiated → covered by the opinion; Because it is integral, the audit must cover it and the evidence must support it. Information that is not clearly differentiated and is left unchanged by management is also treated as part of the audited FS, in line with SA 700 (Revised).

How to solve Reporting on More Than One Set of Financial Statements questions

Use this order for any question on two sets of financial statements or supplementary information. Write the answer in provision, facts and conclusion form.

1Identify what is presented: two full sets under different frameworks, or one set plus extra information the framework does not require.
2For two sets, state that the auditor must judge whether each framework is acceptable in the circumstances.
3State that the auditor forms an opinion on each set separately, and that opinions may differ.
4Conclude that the auditor may issue separate reports, and mention an Other Matter paragraph referring to the other set and its report where both are reported on.
5For supplementary information, test whether it is clearly differentiated from the audited financial statements.
6If it is not clearly differentiated, say the auditor asks management to change the presentation.
7If management refuses, say the auditor explains in the auditor's report why the supplementary information is unacceptable, and that the information is treated as part of the audited financial statements and covered by the opinion.
8Close with the conclusion tied to the facts in the case, naming the report type and paragraph.

Quickest way: Two-question shortcut

When to use it: Use it for case-scenario MCQs and short written answers when time is tight.

Ask: is this a second full set of FS, or extra information? Two sets → separate reports may be issued. Extra information → differentiation test.
For two sets, write: framework acceptable, separate opinion on each, Other Matter paragraph for cross-reference.
For extra information, write: clearly differentiated? If no, ask management to change. If management refuses, the report explains why the supplementary information is unacceptable, and the information is treated as part of the audited FS and covered by the opinion.
Check whether the case says the opinions differ. If so, do not carry a modification from one report to the other.

Common mistakes in Reporting on More Than One Set of Financial Statements

Issuing one combined report with a single opinion covering both sets.
Students assume one engagement means one report.
Fix: Each set has its own framework and its own opinion. Write that the auditor may issue separate reports, one for each set.
Assuming the second framework is acceptable because the first one is.
The same management, books and period make the frameworks seem interchangeable.
Fix: State that the auditor evaluates the acceptability of each framework separately.
Carrying a qualification in one set automatically into the other report.
Students link the sets because the underlying records are the same.
Fix: Judge each set under its own framework. The same fact may be a misstatement under one framework and not under the other.
Treating all supplementary information as audited.
It is printed in the same annual report as the audited statements.
Fix: Information that is clearly differentiated and not required by the framework is outside the opinion. Information that is integral to the FS by its nature cannot be differentiated, so it is covered by the opinion. Information that is not clearly differentiated, and that management will not change, is treated as part of the audited FS and is also covered by the opinion.
Saying the auditor simply deletes unaudited supplementary information when management refuses to change its presentation.
Students mix the auditor's powers with management's responsibility for the presentation.
Fix: The auditor asks management to change it. If management refuses, the auditor explains in the auditor's report why the supplementary information is unacceptable, and the information is treated as part of the audited FS.
Omitting the Other Matter paragraph or putting it in the wrong place, such as the Basis for Opinion section.
Students are unsure which SA governs the paragraph.
Fix: Link it to SA 706 (Revised) and describe it as a separate paragraph referring to the other set and the report issued on it.

Worked examples

Example 1

Case: Meridian Ltd, an Indian listed company, prepares financial statements under Ind AS for statutory purposes. Its foreign parent also asks for a second set prepared under IFRS as issued by the IASB, and engages the same auditor to report on both. The auditor finds both frameworks acceptable. The Ind AS set has no misstatements. The IFRS set contains a material departure that management refuses to correct. How should the auditor report?

Show the solution

Provision: when an entity prepares more than one set of financial statements under different frameworks, the auditor must judge whether each framework is acceptable and form an opinion on each set.
Facts: both frameworks are acceptable. The Ind AS set is free of material misstatement. The IFRS set has a material departure that management will not correct.
The auditor may issue separate reports, one for each set, and here that is the sensible course because the opinions differ.
For the Ind AS set, an unmodified opinion is given.
For the IFRS set, a qualified opinion is given if the effect is material but not pervasive, or an adverse opinion if it is both material and pervasive. The modification does not carry over to the Ind AS report.
Each report may include an Other Matter paragraph under SA 706 (Revised) that refers to the other set and to the report issued on it.

Answer: The auditor may issue two separate reports, and separate reports are practical here because the opinions differ. The Ind AS report is unmodified. The IFRS report is modified (qualified or adverse, depending on pervasiveness). Each may contain an Other Matter paragraph referring to the other set and its report.

Example 2

Case: Brightline Ltd presents, immediately after its audited financial statements, a page titled 'Value Added Statement and Key Performance Ratios'. The framework does not require it. The page is in the same font, has no label saying it is unaudited, and sits inside the financial statements section. The auditor asks management to separate and label it. Management refuses. What should the auditor do?

Show the solution

Provision: supplementary information not required by the framework but presented with the financial statements must be clearly differentiated from them. The auditor first tests whether it is clearly differentiated, that is, whether it sits outside the audited statements or is read as part of them.
Facts: the page is not required by the framework. It is formatted like the audited statements, unlabelled and placed inside the statements section. It is therefore not clearly differentiated, and readers may take it to be part of the audited statements.
The auditor first asks management to change the presentation, which management has refused.
Because management refuses, the auditor explains in the auditor's report why the supplementary information is unacceptable.
Because the page is inside the financial statements section and is not differentiated, it is treated as part of the audited financial statements and is covered by the audit opinion. The auditor must therefore consider the opinion on it as well, and cannot treat it as outside the audit.

Answer: The auditor asked management to change the presentation and management refused, so the auditor's report explains why the supplementary information (the Value Added Statement and ratios page) is unacceptable. The page, being inside the financial statements section and not clearly differentiated, is treated as part of the audited financial statements and is covered by the audit opinion.

Exam tips

Write the sequence in this order: acceptability of each framework, separate opinion, separate report, Other Matter paragraph.
For supplementary information, always show the test of whether it is clearly differentiated before stating the conclusion.
Do not quote a paragraph number unless you are sure of it. Name SA 700 (Revised) and SA 706 (Revised) and apply the rule to the facts.
In MCQs, watch for options that merge both sets into one opinion or carry a modification across. Those are usually wrong.
Use words from the case, such as the names of the frameworks or the page, so the examiner sees application and not a memorised rule.

Practice questions from Reporting

Reporting on More Than One Set of Financial Statements: frequently asked questions

Does the auditor have to issue separate reports for each set of financial statements?

No. SA 700 (Revised) says the auditor may issue separate reports on each set; it does not require them. Separate reports are a sensible approach because each set has its own framework and its own opinion, and the opinions may differ. An Other Matter paragraph can refer to the other set and its report.

What is the role of the Other Matter paragraph here?

It alerts users that another set of financial statements exists for the same entity and that the auditor has reported on it. It comes under SA 706 (Revised) and does not affect the opinion. It is a communication, not a modification.

What if supplementary information is not clearly differentiated from the financial statements?

The auditor asks management to change the presentation so that it is clearly differentiated. If management refuses, the auditor explains in the auditor's report why the supplementary information is unacceptable.

Do I need to memorise the SA 700 paragraph number on more than one set of financial statements?

No. Learn the rule and its logic from the SA 700 (Revised) application guidance on reporting on more than one set of financial statements. In the exam, state the requirement in words and apply it to the facts. A correct rule applied to the case earns the marks.