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CMA Intermediate · Corporate Accounting and Auditing · Audit Report and Reporting under CARO

Parent Ltd prepares consolidated financial statements including subsidiaries A Ltd, B Ltd and C Ltd. The CARO report of B Ltd contains an adverse remark in clause 3(vii), and the other reports are clean. What does CARO 2020 clause 3(xxi) require in the report on the consolidated financial statements?

The auditor should indicate B Ltd as the company and the paragraph number of its CARO report containing the adverse remark. Clause 3(xxi) requires details of companies and paragraph numbers only where qualifications or adverse remarks exist in group companies' CARO reports.

  1. ANo reporting, since CARO applies only to standalone statements
  2. BOnly a statement that the parent's own CARO report is clean
  3. CIndication of the company (B Ltd) and the paragraph number of its CARO report containing the adverse remarkCorrect
  4. DA full repetition of all CARO clauses for all three subsidiaries

Explanation

Clause 3(xxi) asks whether the respective auditors' CARO reports of companies included in the consolidation contain qualifications or adverse remarks. If yes, the auditor indicates the details of those companies and the paragraph numbers. Hence B Ltd and its relevant paragraph are reported; clean companies are not repeated.

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