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CA Final · Advanced Auditing, Assurance and Professional Ethics · Reporting

Mehta & Associates are auditing Kaveri Textiles Ltd. The company prepares one set of financial statements under Ind AS for statutory purposes and a second set under IFRS for its foreign parent. The auditor has determined that both frameworks are acceptable in the circumstances and has been engaged to report on both sets. Which action is consistent with SA 706 (Revised)?

The auditor may include an Other Matter paragraph stating that the entity has prepared another set of financial statements under another general purpose framework and that the auditor has issued a report on them. This is allowed when both frameworks are acceptable and the auditor reports on both sets.

  1. AInclude an Other Matter paragraph in the report on the Ind AS statements stating that another set of financial statements has been prepared under another general purpose framework and that the auditor has issued a report on themCorrect
  2. BInclude an Emphasis of Matter paragraph stating that the Ind AS statements are materially misstated because they differ from the IFRS statements
  3. CIssue a qualified opinion on the Ind AS statements because two sets of financial statements exist
  4. DRefrain from any reference to the IFRS statements because an auditor may never mention a second set of financial statements

Explanation

SA 706 (Revised) permits an Other Matter paragraph where an entity prepares a second set under another general purpose framework, the auditor finds both frameworks acceptable, and has reported on both. Having two sets is not a misstatement, so a qualification or an Emphasis of Matter alleging misstatement is wrong. Saying that no reference may ever be made contradicts the standard.

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