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{The following is the text of the Auditing and Assurance Standard (AAS) 25,
"Comparatives", issued by the Council of the Institute of Chartered Accountants of
India. This Auditing and Assurance Standard should be read in conjunction with the
"Preface to the Statements on Standard Auditing Practices", issued by the Institute. 1
Introduction
1. The purpose of this Auditing and Assurance Standard (AAS) is to establish
standards on the auditor?s responsibilities regarding comparatives. It does not
deal with situations when summarized financial statements or data are presented
with the audited financial statements.
2. The auditor should determine whether the comparatives comply, in all
material respects, with the financial reporting framework relevant to the
financial statements being audited.
3. The existence of differences in financial reporting frameworks results in
comparative financial information being presented differently in each framework.
Comparatives in financial statements, for example, may present amounts (such as
financial position, results of operations, cash flows) and appropriate disclosures of
an entity for more than one period, depending on the framework. The frameworks
and methods of presentation that are referred to in this AAS are as follows:
a. for corresponding figures, the auditor?s report only refers to the financial
statements of the current period; whereas
a. accounting policies used for the corresponding figures are consistent with
those of the current period or whether appropriate adjustments and/or
disclosures have been made; and
a. that the financial statements of the prior period were audited by another
auditor;
b. the type of report issued by the predecessor auditor and, if the report was
modified, the reasons therefor; and
Appendix 1
Discussion of Financial Reporting Frameworks for Comparatives
1. Comparatives covering one or more preceding periods provide the users of
financial statements with information necessary to identify trends and changes
affecting an entity over a period of time.
2. Under financial reporting frameworks (both implicit and explicit), comparability and
consistency are desirable qualities for financial information. Defined in broadest
terms, comparability is the quality of having certain characteristics in common and
comparison is normally a quantitative assessment of the common characteristics.
Consistency is a quality of the relationship between two accounting numbers.
Consistency (for example, consistency in the use of accounting principles from
one period to another, the consistency of the length of the reporting period, etc.) is
a prerequisite for true comparability.
3. There are two broad financial reporting frameworks for comparatives: the
corresponding figures and the comparative financial statements.
4. Under the corresponding figures framework, the corresponding figures for the
prior period(s) are an integral part of the current period financial statements and
have to be read in conjunction with the amounts and other disclosures relating to
the current period. The level of detail presented in the corresponding amounts and
disclosures is dictated primarily by its relevance to the current period figures.
5. Under the comparative financial statements framework, the comparative financial
statements for the prior period(s) are considered separate financial statements.
Accordingly, the level of information included in those comparative financial
statements (including all statement amounts, disclosures, footnotes and other
explanatory statements to the extent that they continue to be of significance)
approximates that of the financial statements of the current period.
Appendix 2
Illustrative Auditor's Report
Illustration Illustrative Audit Report for the circumstances described in
1. Paragraph 11(a). (Prepared under the reporting framework of Section
227 of the Companies Act, 1956)
Auditor's Report to the Members of ??????(name of the Company)
1. We have audited the attached balance sheet of??????.(name of the Company),
as at 31st March, 20X1 and also the profit and loss account for the year ended on
that date annexed thereto. These financial statements are the responsibility of the
Company?s management. Our responsibility is to express an opinion on these
financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted
in India. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
3. As required by the Manufacturing and Other Companies (Auditor's Report) Order,
1988 issued by the Central Government of India in terms of sub-section (4A) of
section 227 of the Companies Act, 1956, we enclose in the Annexure 3 a
statement on the matters specified in paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to above, we report that:
i. We have obtained all the information and explanations, which to the best
of our knowledge and belief were necessary for the purposes of our audit;
ii. In our opinion, proper books of account as required by law have been
kept by the company so far as appears from our examination of those
books (and proper returns adequate for the purposes of our audit have
been received from the branches not visited by us. The Branch Auditor?s
Report(s) have been forwarded to us and have been appropriately dealt
with);
iii. The balance sheet and profit and loss account dealt with by this report are
in agreement with the books of account (and with the audited returns from
the branches);
a. In the case of the balance sheet, of the state of affairs of the Company, as
at 31st March 20X1, and
b. in the case of the profit and loss account, of the loss for the year ended
on that date.
For ABC and Co.
Chartered Accountants
Signature
Name of the Member Signing the Audit Report
Designation 4
Address:
Date:
Illustration Illustrative Report for the circumstances described in Paragraph
2. 11(b). (Prepared under the reporting framework of Section 227 of the
Companies Act, 1956)
Auditor's Report to the Members of ??????(name of the Company)
1. We have audited the attached balance sheet of??????.(name of the Company),
as at 31st March, 20X1 and also the profit and loss account for the year ended on
that date annexed thereto. These financial statements are the responsibility of the
Company?s management. Our responsibility is to express an opinion on these
financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted
in India. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
3. As required by the Manufacturing and Other Companies (Auditor's Report) Order,
1988 issued by the Central Government of India in terms of sub-section (4A) of
section 227 of the Companies Act, 1956, we enclose in the Annexure 5 a
statement on the matters specified in paragraphs 4 and 5 of the said Order.
4. Further to our comments in the Annexure referred to above, we report that:
i. We have obtained all the information and explanations, which to the best
of our knowledge and belief were necessary for the purposes of our audit;
ii. In our opinion, proper books of account as required by law have been
kept by the company so far as appears from our examination of those
books (and proper returns adequate for the purposes of our audit have
been received from the branches not visited by us. The Branch Auditor?s
Report(s) have been forwarded to us and have been appropriately dealt
with);
iii. The balance sheet and profit and loss account dealt with by this report are
in agreement with the books of account (and with the audited returns from
the branches);
iv. It was not possible for us to obtain external confirmations about accounts
receivable balances amounting to Rs. XXXXXX as at 31st March 20X0.
Owing to the nature of company's records, we were unable to satisfy
ourselves about the valuation and existence of accounts receivable and
provisioning thereon. Since provisioning on accounts receivable enter into
the determination of the results of operations and the balances are
included in determination of state of affairs, we were unable to determine
the effect of valuation and provisioning on the financial statements for the
period ended 31st March 20X0. Our audit report on the financial
statements for the period ended 31st March 20X0 was modified
accordingly.
v. In our opinion, the Balance Sheet and Profit and Loss Account dealt with
by this report comply with the accounting standards referred to in sub-
section (3C) of section 211 of the Companies Act, 1956;
a. In the case of the balance sheet, of the state of affairs of the Company, as
at 31 March, 20X1, and
b. in the case of the profit and loss account, of the loss for the year ended
on that date.
For ABC and Co.
Chartered Accountants
Signature
Name of the Member Signing the Audit Report
Designation 6
Address:
Date: