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CS Professional · Compliance Management, Audit and Due Diligence · Audit Engagement

While auditing Sagar Pharma Ltd, the auditor finds that the company's subsidiary, Sagar Labs Pvt Ltd, has not given its records for consolidation, saying the auditor of the parent has no right over them. Under the illustrative engagement letter terms in SA 210, what is the correct position?

Management is to provide access, at all times, to the records of all subsidiaries, including associates and joint ventures, so far as they relate to consolidating the financial statements. The right is linked to consolidation, so it is neither denied because of separate legal entity status nor unlimited.

  1. AThe auditor may ask for subsidiary records only if the subsidiary's own auditor agrees
  2. BThe auditor has no access to subsidiary records because they are separate legal entities
  3. CManagement is to give access, at all times, to the records of subsidiaries (including associates and joint ventures) insofar as they relate to consolidation of the financial statementsCorrect
  4. DAccess is available to subsidiary records for all purposes, including their operational matters unrelated to consolidation

Explanation

The terms include access at all times to records of all subsidiaries, including associate companies and joint ventures, in so far as it relates to consolidation of financial statements. Option D overstates the scope because access is tied to consolidation. Options A and B deny a right the letter provides.

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