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

Sharma & Associates audits Kaveri Textiles Ltd. The company prepares one set of financial statements under Ind AS for statutory purposes and another set under IFRS for its foreign parent. Both frameworks are acceptable in the circumstances, and the firm has been engaged to report on both sets. Which action is permitted by SA 706 (Revised) in the report on the Ind AS financial statements?

The auditor may add an Other Matter paragraph stating that the entity has also prepared financial statements under another general purpose framework and that the auditor has reported on them. This is allowed once both frameworks are found acceptable, and it does not require qualification or withdrawal.

  1. AInclude an Other Matter paragraph referring to the other set of financial statements prepared under another general purpose framework and the report issued on themCorrect
  2. BInclude a Key Audit Matter on the IFRS statements in place of any reference
  3. CQualify the opinion because two sets of statements exist
  4. DWithdraw from the engagement because two frameworks cannot be audited

Explanation

SA 706 (Revised) allows the auditor, when the frameworks are acceptable, to include an Other Matter paragraph stating that another set of statements has been prepared by the same entity under another general purpose framework and that a report has been issued on them. Qualifying the opinion is wrong because the existence of two sets is not a misstatement.

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