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

Sharma & Co. audits Veda Textiles Ltd. The company prepares one set of financial statements under Ind AS for Indian users and a second set under IFRS for its foreign parent, and has engaged the auditor to report on both. The auditor has concluded that both frameworks are acceptable in the circumstances. Which action is consistent with SA 706 (Revised)?

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

  1. AInclude an Other Matter paragraph referring to the other set of financial statements prepared under another general purpose framework and to the auditor's report issued on themCorrect
  2. BInclude an Emphasis of Matter paragraph stating that the IFRS statements are the primary financial statements
  3. CModify the opinion on the Ind AS statements because a second framework has been used
  4. DRefuse to report on the IFRS set because an entity can have only one set of financial statements

Explanation

Where an entity prepares two sets of financial statements under different acceptable general purpose frameworks and the auditor reports on both, the auditor may add an Other Matter paragraph noting the other set and the report issued on it. An Emphasis of Matter paragraph relates to matters already presented or disclosed in the financial statements, so it is wrong here. Using two acceptable frameworks is not a ground for modification.

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