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

Sundaram & Co., Chartered Accountants, audit Kaveri Textiles Ltd. The firm issues a report under the national framework (Ind AS) and the company has also engaged it to report on a second set of financial statements prepared under International Financial Reporting Standards, both frameworks being acceptable in the circumstances. The engagement partner wants to draw readers' attention to the existence of the second set and the report issued on it. Which action is appropriate under SA 706 (Revised)?

The auditor may include an Other Matter paragraph referring to the fact that another set of financial statements was prepared under another general purpose framework and that a report was issued on it. This is permitted when both frameworks are acceptable. It is not an Emphasis of Matter and gives no ground for modification.

  1. AInclude an Other Matter paragraph in the auditor's report referring to the other set of financial statements and the report issued on themCorrect
  2. BInclude an Emphasis of Matter paragraph stating that the IFRS statements are fundamental to users' understanding of the Ind AS statements
  3. CIssue a qualified opinion because two sets of financial statements exist
  4. DMake no reference, because a second set can never be mentioned in the report

Explanation

SA 706 (Revised) permits the auditor, where the frameworks are acceptable, to include an Other Matter paragraph stating that another set has been prepared by the same entity under another general purpose framework and that a report has been issued on it. An Emphasis of Matter paragraph is for matters already presented in the financial statements, so it does not fit. Having two sets is not a ground for a qualification.

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