Responsibility of the Statutory Central Auditor
It is necessary for the auditor to take into consideration the accounting standards relevant for the purpose of CFS. They are AS 21: Consolidated Financial Statements, AS 23: Accounting for Investments in Associates and AS 27: Financial Reporting of Interests in Joint Ventures. Further, careful consideration should be given by the auditor of CFS to Other Matters, Emphasis of Matter, Modified Opinion in the report issued by the component auditors.
In addition to the Accounting Standards, it is pertinent for an auditor to consider
the relevant accounting and auditing Guidance Notes.
When the parent’s auditor decides that to make reference to the auditor’s report of the other auditors in the auditor’s report on CFS, the latter should disclose clearly the magnitude of the portion of the financial statements audited by the other auditor(s). This may be done by stating the rupee amounts or percentages of total assets and total revenue of subsidiary (ies) included in CFS not audited by the parent’s auditor. However, reference in the report of the auditor of CFS to the fact that part of the audit of the group was made by other auditor(s) is not to be construed as a modification of the opinion. The auditor should also consider implications on reporting if some of the components are unaudited*.
Generally, while conducting audit of a bank, SCA has a practice of issuing general instructions for the branch auditors to facilitate easy consolidation of branch accounts. It would be appropriate to have a similar approach with respect to auditors of components, if the component auditors are different from the group auditor. This is especially important in case of “the other financial information” which is necessary for the purpose of consolidation and preparation of notes. It is advisable to make sufficient arrangements for co-ordination and efforts at the planning stage.