Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: VAT RATES :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: form 3cd :: cpt :: Central Excise rule to resale the machines to a new company :: articles on VAT and GST in India :: TDS :: ACCOUNTING STANDARD :: empanelment :: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARDS :: ARTICLES ON INPUT TAX CREDIT IN VAT :: list of goods taxed at 4% :: VAT Audit :: due date for vat payment
 
 
ICAI »
 Examination dates of Certificate Course on Forex and Treasury Management conducted by Committee on Financial Markets and Investors Protection on 21st and 22nd January, 2017
  Syllabus for the Limited Insolvency Examination on 31st December, 2016 to become Insolvency Professional
 Extension of last date for submission of application forms for Information Systems Audit-Assessment Test (ISA-AT), upto 10th December 2016.
 Four Weeks Residential Programme to be held from 28th January, 2017 to 24th February, 2017 at Centre of Excellence, Hyderabad for Women Participants only.
 CPE Events 5th December - 10th December 2016
 Here's how your employer can help you save tax
 Introduction of facility for online submission of requests for issue of duplicate mark sheets/pass certificates.
 ICAI invites suggestions on revised Model GST Law
 Guidance Note on Reports in Company Prospectuses (Revised 2016) issued by the Auditing and Assurance Standards Board
 President's Message - December 2016
 Ind AS Transition Facilitation Group (ITFG) Clarification Bulletin 6

Guidance Note on Audit of Consolidated Financial Statements (Revised 2016) issued by the Auditing and Assurance Standards Board
October, 18th 2016
   Guidance Note on Audit of
Consolidated Financial Statements
         (Revised 2016)




Readers may note that this Guidance Note supercedes
the Guidance Note on Audit of Consolidated Financial
Statements, issued by the ICAI in 2003.




The Institute of Chartered Accountants of India
            (Set up by an Act of Parliament)
                       New Delhi
© The Institute of Chartered Accountants of India


All rights reserved. No part of this publication may be reproduced,
stored in a retrieval system, or transmitted, in any form, or by any
means, electronic, mechanical, photocopying, recording, or
otherwise, without prior permission, in writing, from the publisher.



Edition           :   October, 2016



Committee         :   Auditing and Assurance Standards Board



E-mail            :   aasb@icai.in



Website           :   www.icai.org



Price             :   Rs. 150/-



ISBN No           :   978-81-8441-847-7



Published by      :   The Publication Department on behalf of the
                      Institute of Chartered Accountants of India,
                      ICAI Bhawan, Post Box No. 7100,
                      Indraprastha Marg, New Delhi - 110 002.

Printed by        :   Sahitya Bhawan Publications, Hospital
                      Road, Agra - 282 003
                      October/2016/
                                             FOREWORD

The Auditing and Assurance Standards Board of the Institute of
Chartered Accountants of India, in 2003, had issued the Guidance
Note on Audit of Consolidated Financial Statements to provide
guidance to the members undertaking audits of consolidated
financial statements. Since the issuance of this Guidance Note, a
number of developments have taken place like notification of the
Companies (Accounting Standards) Rules, 2006, replacement of
the Companies Act, 1956 by the Companies Act, 2013, issuance
of the Indian Accounting Standards (Ind AS) by ICAI, notification
of the Companies (Indian Accounting Standards) Rules, 2015.
These developments necessitated the revision of the Guidance
Note.

It is heartening that the Auditing and Assurance Standards Board
has brought out this revised Guidance Note on Audit of
Consolidated Financial Statements for the benefit of the members.
The Guidance Note has been written in an easy to understand
language and contains detailed guidance on various issues
involved in the audits of consolidated financial statements. I am
happy that the Guidance Note is a comprehensive and self-
contained reference document for the members.

I wish to compliment CA. Shyam Lal Agarwal, Chairman, CA.
Sanjay Vasudeva, Vice-Chairman and other members of the
Auditing and Assurance Standards Board for bringing out this
revised Guidance Note for the benefit of the members.

I am sure that the members would find the revised Guidance Note
immensely useful.


September 26, 2016                      CA. M. Devaraja Reddy
New Delhi                                       President, ICAI
                                                     PREFACE
In 2003, the Auditing and Assurance Standards Board of the
Institute of Chartered Accountants of India had issued the
`Guidance Note on Audit of Consolidated Financial Statements'.
Since 2003 and especially during the last 2-3 years, a number of
developments have taken place which made it necessary to revise
this Guidance Note. These developments include issuance of the
Companies (Accounting Standards) Rules, 2006 and the
Companies (Indian Accounting Standards) Rules, 2015. Also, the
Companies Act, 1956 has been replaced by the Companies Act,
2013 which has changed some of the provisions relating to the
preparation and audit of the consolidated financial statements.
It gives me immense pleasure to place in your hands this revised
edition of the `Guidance Note on Audit of Consolidated Financial
Statements' which incorporates the impact of these developments
at appropriate places. The Guidance Note covers aspects such as
introduction, definitions, responsibility of the parent, responsibility
of the auditor of consolidated financial statements, audit
considerations, auditing the consolidation, special considerations,
management representations, reporting. For the benefit of the
members, the Appendices to the Guidance Note include the
illustrative formats of auditor's report on consolidated financial
statements.
At this juncture, I wish to place on record my gratitude to all the
members of Delhi Study Group viz. CA. Sanjay Vasudeva
(Convenor), CA. Sanjeev Singhal, CA. Parveen Kumar, CA.
Vinamr Tulshan, CA. Sandeep Aggarwal, CA. Prakash C Bisht,
Mr. Kapil Jain, CA. Archana Bhutani, CA. Moiz Anavarali
Manjiyani, CA. Indrajit Pathak, CA. Sumit Seth and CA. Surender
Kumar for sparing time out of their other preoccupations for
revising the Guidance Note. I would also like to thank all the
members of Jaipur Study Group viz. CA. Bhupendra Mantri, CA.
Vishnu Mantri, CA. Jugal Agrawal, CA. Vikas Gupta, CA. Prahalad
Gupta, CA. Mukesh Gupta and CA. Sandeep Jhanwar for their
dedicated efforts in reviewing and finalising the Guidance Note.
I wish to express my sincere thanks to CA. M. Devaraja Reddy,
Honourable President, ICAI and CA. Nilesh S. Vikamsey, Vice
President, ICAI for their guidance and support to the activities of
the Board.

I wish to place on record high appreciation of CA. Sanjay
Vasudeva, Vice Chairman of the Board for his whole-hearted
support. I also wish to place on record my sincere thanks to all the
Board Members and all the Council Members for their
suggestions, support and guidance in finalising this Guidance
Note as well as other pronouncements of the Board. I also wish
to thank CA. Megha Saxena, Secretary to the Board and other
officers and staff of AASB for their continued co-operation.

I am confident that the Guidance Note would be well received by
the members and other interested readers.



September 26, 2016                      CA. Shyam Lal Agarwal
Jaipur                                               Chairman,
                         Auditing and Assurance Standards Board
                                                CONTENTS

                                                Paragraph Page
                                                   No.     No.
Introduction                                          1-4    1
Definitions                                            5     2
Responsibility of Parent                              6-7    2
Responsibility of the Auditor        of   the        8-10    3
Consolidated Financial Statements
Audit Considerations                                11-17    5
Auditing the Consolidation                          18-26    8
Special Considerations                              27-44   13
Management Representations                            45    22
Reporting                                             46    23
When the Parent's Auditor is also the Auditor       47-48   23
of All its Components
When the Parent's Auditor is not the Auditor        49-50   24
of All its Components
When the Component(s) auditor Reports on            51-54   25
Financial Statements under an Accounting
Framework Different than that of the Parent
When the Component(s) auditor Reports                 55    26
under an Auditing Framework Different than
that of the Parent
Components Not Audited                              56-57   26
Appendices
Appendix    1:   Illustrative  Formats     of               28
Independent     Auditor's      Report     on
Consolidated Financial Statements
Appendix 2: Definitions of Terms used in the                59
Guidance Note
Introduction
1. The Council of the Institute of Chartered Accountants of
India had issued Accounting Standard (AS) 21 `Consolidated
Financial Statements' which was subsequently notified as a part
of the Companies (Accounting Standards) Rules, 2006 by the
Ministry of Corporate Affairs and subsequently amended vide the
Companies (Accounting Standards) Amendment Rules, 2016.
Also Indian Accounting Standard (Ind AS) 110, `Consolidated
Financial Statements' has been issued as a part of the Companies
(Indian Accounting Standards) Rules, 2015 by the Ministry of
Corporate Affairs. AS 21 and Ind AS 110 lay down principles and
procedures for preparation and presentation of consolidated
financial statements under AS and Ind AS respectively1. In other
words, whenever a parent decides to or is required to prepare
and present consolidated financial statements, it should do so
in accordance with the requirements of applicable Accounting
Standards2 under the relevant financial reporting framework.

1
  MCA has issued a road map for convergence with Ind AS. Those companies
which are required to follow Ind AS will prepare their consolidated financial
statements as per Ind AS 110 on Consolidated Financial Statements. Companies
which are not covered by Ind AS road map and don't voluntarily elect to follow
Ind AS are required to follow AS 21 on Consolidated Financial Statements
notified under Companies (Accounting Standards) Rules, 2006 as amended upto
date (recently AS 21 has been amended as per Notification No. G.S.R. 364(E)
dated March 30, 2016). It may also be noted that Section 129 of the Companies
Act, 2013 now mandates preparation of consolidated financial statements by all
companies having subsidiaries and/associates and /joint ventures or joint
operations. Similarly, paragraph 9 of AS 21(Revised) requires enterprises which
do not have a subsidiary but have an associate and/or a joint venture to also
prepare consolidated financial statements in accordance with AS 23 and AS 27
respectively.
For non-corporate entities, accounting standards issued by ICAI are applicable.
2
  For Companies covered by Ind AS, the relevant accounting standards are Ind
AS 27 ­ Separate Financial Statements, Ind AS 28 ­ Investments in Associates
and Joint Ventures, Ind AS 110 ­ Consolidated Financial Statements, Ind AS 111
­ Joint Arrangements and Ind AS 112 ­ Disclosure of Interest in Other Entities,
notified under the Companies (Indian Accounting Standards) Rules, 2015. For
Companies not covered by Ind AS, the relevant accounting standards are AS 21
- Consolidated Financial Statements, AS 23 ­ Accounting for Investments in
Associates in Consolidated Financial Statements and AS 27 ­ Financial
Reporting of Interests in Joint Ventures, notified under the Companies
(Accounting Standards) Rules, 2006. For non-corporate entities, the relevant
accounting standards are AS 21, 23 and 27 issued by ICAI.
GN on Audit of Consolidated Financial Statements (Revised 2016)


This Guidance Note does not provide guidance in relation to
amalgamation/business combination.
2. Consolidated financial statements normally include
consolidated balance sheet, consolidated statement of profit
and loss, consolidated cash flow statement, a consolidated
statement of change in equity (if applicable) and any
explanatory notes annexed to, or forming part thereof.
Consolidated financial statements are presented, to the extent
possible, in the same format as adopted by the parent for its
separate financial statements. The formats for preparation of
balance sheet, statement of profit and loss and a statement of
change in equity (if applicable) are prescribed under the
Schedule III of the Companies Act, 2013.
3. An entity which prepares the consolidated financial
statements, either under any law or regulation governing the
entity or suo motu, might be required to or otherwise engage
the auditor for conducting the audit of consolidated financial
statements. However, a law or regulation governing the entity
may require the consolidated financial statements to be audited
by the statutory auditor of the entity. This Guidance Note
provides guidance on the specific issues and audit procedures
to be applied in an audit of consolidated financial statements.
This Guidance Note can also be used while auditing
consolidated financial statements prepared for special purpose,
to the extent applicable.
4. This Guidance Note does not deal with accounting matters
arising on consolidation of financial statements.

Definitions
5. Various terms used in this Guidance Note, have the same
meaning as defined in applicable accounting standards. The
same have been given in Appendix II to the Guidance Note.

Responsibility of Parent
6. The responsibility for the preparation and presentation of
consolidated financial statements, among other things, is that of
the management of the parent. This includes:

                                   2
        GN on Audit of Consolidated Financial Statements (Revised 2016)


(a) identifying components, and including the financial
    information of the components to be included in the
    consolidated financial statements;
(b) where appropriate, identifying reportable segments for
    segment reporting;
(c) identifying related parties and related party transactions for
    reporting;
(d) obtaining accurate and complete financial information from
    components;
(e) making appropriate consolidation adjustments.
(f) harmonization of accounting policies and accounting
    framework; and.
(g) GAAP conversion, where applicable.
7. Apart from the above, the parent ordinarily issues
instructions to the management of the components specifying
the parent's requirements relating to financial information of the
components to be included in the consolidated financial
statements. The instructions ordinarily cover the accounting
policies to be applied, statutory and other disclosure
requirements applicable to the parent, including the
identification of and reporting on reportable segments, and
related parties and related party transactions, and a reporting
timetable.

Responsibility of the Auditor of the Consolidated
Financial Statements
8. Section 129(4) of the Companies Act, 2013 requires that the
provisions of this Act applicable to the preparation, adoption and
audit of the financial statements of a holding company shall,
mutatis mutandis, apply to the consolidated financial statements.
Besides other matters, the principal auditor of the consolidated
financial statements is responsible for expressing an opinion on
whether the consolidated financial statements are prepared, in
all material respects, in accordance with the financial reporting
framework under which the parent prepares the consolidated
financial statements in addition to reporting on the additional

                                 3
GN on Audit of Consolidated Financial Statements (Revised 2016)


matters as required under the Companies Act, 2013 and any
other statute to the extent applicable.
9. Therefore, the auditor's objectives                 in   an    audit    of
consolidated financial statements are:
(a) to satisfy himself that the consolidated financial statements
    have been prepared in accordance with the requirements of
    applicable financial reporting framework;
(b) to enable himself to express an opinion on the true and fair
    view presented by the consolidated financial statements.
(c) to enquire into the matters as specified in section 143(1) of
    the Companies Act, 2013; and.
(d) to report on the matters given in the clauses (a) to (i) of
    section 143(3) of the Companies Act, 2013; for other matters
    under section 143(3)(j) read with rule 11 of the Companies
    (Audit and Auditors) Rules, 2014, to comment on the matters
    specified in sub-rule (a),(b) and (c)3 to the extent applicable.
10. Standards on Auditing4, Statements and Guidance Notes
on auditing issued by the Institute of Chartered Accountants of
India apply in the same manner to audit of consolidated
financial statements as they apply to audit of separate financial
statements. It means that the auditors, while conducting the
audit of consolidated financial statements are, inter alia,
expected to:
(a) plan their work to enable them to conduct an effective audit
    in an efficient and timely manner;
(b) obtain an understanding of the accounting and internal
    control systems including IT system like consolidation tool,
    sufficient to plan the audit and determine the nature, timing
    and extent of his audit procedures. Such an understanding


3
  The auditor of the consolidated financial statements generally report on the
matters pertaining to the component, on the basis of auditors' report of the
respective component.
4
  As specified under the Companies Act, 2013.



                                      4
          GN on Audit of Consolidated Financial Statements (Revised 2016)


     would help the auditors to develop an effective audit
     approach;
(c) use professional judgment to assess audit risk and to
    design audit procedures to ensure that the risk is reduced
    to an acceptable level; etc.

Audit Considerations
11. The following features of consolidated financial statements
have an impact on the related audit procedures:
(a) The consolidated financial statements are prepared on the
    basis of separate financial statements of the parent and its
    components, using the consolidation procedures prescribed
    by Accounting Standards5 under applicable financial
    reporting framework; and
(b) The auditor of the consolidated financial statements may
    use the work of other auditors as per requirement of
    Standards on Auditing unless the auditor of consolidated
    financial statements is also the auditor of the other
    components of the group.
12. The consolidated financial statements (including the
intermediate consolidated financial statements prepared
internally)6 are prepared using the separate financial
statements of the parent and its components and also other
financial information, which might not be covered by the

5
  Accounting Standard (AS) 21, Consolidated Financial Statements, Accounting
Standard (AS 23)- Accounting for Investments in Associates in Consolidated
Financial Statements and Accounting Standard (AS) - 27, Financial Reporting of
Interests in Joint Ventures OR Indian Accounting Standard (Ind AS) 110 ­
Consolidated Financial Statements, Indian Accounting Standard (Ind AS) 111-
Joint Arrangements, Indian Accounting Standard (Ind AS) 112 ­Disclosure of
Interests in Other Entities and Indian Accounting Standard (Ind AS) 28 ­
Investments in Associates and Joint Ventures.
6
  Intermediate consolidated financial statements are the consolidated financial
statements of an intermediate parent, e.g., Company A has one subsidiary
Company B. Company B has a subsidiary Company C. In this case, Company B
is the intermediate parent and the consolidated financial statements prepared by
Company B will be intermediate consolidated financial statements.



                                       5
GN on Audit of Consolidated Financial Statements (Revised 2016)


separate financial statements of these entities. The `other
financial information' would include disclosures to be made in
the consolidated financial statements about the components,
proportion of items included in the consolidated financial
statements to which different accounting policies have been
applied where permitted, adjustments made for the effects of
significant transactions or other events that occur between the
financial statements of parent and its components, as the case
may be, etc. Thus, this `other financial information' would be
required to be additionally disclosed.
13. When an auditor accepts the audit of consolidated financial
statements, the auditor should assess whether based on his
work alone he would be able to express an opinion on the true
and fair view presented by the consolidated financial
statements. If the auditor is of the view that his own
participation may not be enough or sufficient, he should
consider using the work of `other auditors'.
14. Such `other auditors' might be the statutory auditors of the
separate financial statements of one or more of the components
or the auditors appointed specifically for assisting the auditor of
the consolidated financial statements (the principal auditor).
15. Where the statutory auditors of one or more of the
components of the parent are also requested to assist the
principal auditor, the work to be performed by such statutory
auditors for use by the principal auditor would constitute an
assignment separate from the assignment to conduct the
statutory audit of the respective component.
16. Standard on Auditing (SA) 600, `Using the Work of Another
Auditor' establishes standards when an auditor, reporting on
the financial statements of an entity (the group--in the case of
consolidated financial statements), uses the work of another
auditor on the financial information of one or more components
included in the financial statements of the entity (Paragraph 2 of
SA 600). The principal auditor, if he decides to use the work of
another auditor in relation to the audit of consolidated financial
statements, should comply with the requirements of SA 600.


                                   6
          GN on Audit of Consolidated Financial Statements (Revised 2016)


17. In carrying out the audit of the standalone financial
statements, the computation of materiality for the purpose of
issuing an opinion on the standalone financial statements of
each component would be done component-wise on a
standalone basis. However, with regard to determination of
materiality during the audit of consolidated financial statements
(CFS), the auditor should consider the following:

     The auditor is required to compute the materiality for the
     group as a whole. This materiality should be used to
     assess the appropriateness of the consolidation
     adjustments (i.e. permanent consolidation adjustments and
     current period consolidation adjustments) that are made by
     the management in the preparation of CFS. (Refer
     paragraph 27 and 30 of this Guidance Note).

     The parent auditor can also use the materiality computed
     on the group level to determine whether the component's
     financial statements are material to the group to determine
     whether they should scope in additional components, and
     consider using the work of other auditors as applicable7.
     However, while considering the observations (for instance
     modification and /or emphasis of matter in accordance with
     SA 705/706) of the component auditor in his report on the
     standalone financial statements, the concept of materiality
     would not be considered. Thus, the component auditor's
     observations, if any, on the component's financial
     statements, irrespective of whether the auditors of the
     component are also the auditors of the CFS or not, are
     required to be included in the parent auditor's report on the
     CFS, regardless of materiality. (Refer paragraph 46 of this
     Guidance Note)

7
  Refer ICAI's Announcement on the Manner of Disclosure in the Auditor's Report
of the Fact of Inclusion of Unaudited Financial Statements/ Information of
Component/s in the Financial Statements Audited by the Principal Auditor(s)
issued in February 2014.


                                      7
GN on Audit of Consolidated Financial Statements (Revised 2016)


Auditing the Consolidation
18. Before        commencing an audit of consolidated financial
statements,       the auditor should plan his work to enable him to
conduct an        effective audit in an efficient and timely manner.
The auditor        should make plans, among other things, for the
following:
(a) Understanding of the group structure and group-wide
    controls8 including assessment of Information Technology
    (IT) system and related general and applications IT related
    controls (manual and automated) for consolidation process;
(b) understanding of accounting policies of the parent and its
    components as well as of the consolidation process
    including the process of translation of financial statements
    of foreign components;
(c) determining and programming the nature, timing, and
    extent of the audit procedures to be performed based on


8
    Group-wide controls may include a combination of the following:
      a. group management's risk assessment process, that is, the process for
          identifying, analysing and managing business risks, including the risk of
          fraud, that may result in material misstatement of the group financial
          statements
      b. monitoring, controlling, reconciling, and eliminating intra-group
          transactions and unrealized profits, and intra-group account balances at
          group level
      c. a process for monitoring the timeliness and assessing the accuracy and
          completeness of financial information received from components
      d. a central IT system controlled by the same general IT controls for all or
          part of the group
      e. control activities within an IT system that is common for all or some
          components
      f. monitoring of controls, including activities of the internal audit function
          and self-assessment programs
      g. consistent policies and procedures, including a group financial reporting
          procedures manual
      h. group-wide programs, such as codes of conduct and fraud prevention
          programs, and
      i. arrangements for assigning authority and responsibility to component
          management.



                                          8
        GN on Audit of Consolidated Financial Statements (Revised 2016)


    the assessment of the risk of material misstatement in the
    consolidation process;
(d) determining the extent of use of other auditor's work in the
    audit; and
(e) coordinating the work to be performed.

19. A parent which presents consolidated financial statements
is required to consolidate all its components in the consolidated
financial statements other than those for which exceptions have
been provided in the relevant accounting standards under the
applicable financial reporting framework.
20. The auditor should obtain a listing of all the components
included in the consolidated financial statements and review the
information provided by the management of the parent
identifying the components. The auditor should verify that all
the components have been included in the consolidated
financial statements unless these components meet criterion for
exclusion as referred to in paragraph 19 above. In respect of
completeness of this information, the auditor should perform the
following procedures:
(a) review his working papers for the prior years for the known
    components;
(b) review the parent's procedures for identification of various
    components;
(c) make inquiries of management to identify any new
    components or any component which goes out of
    consolidated financial statements.
(d) review the investments of parent as well as its components
    to determine the shareholding in other entities;
(e) review the joint ventures and joint arrangements as
    applicable;
(f) review the other arrangements entered into by the parent
    that have not been included in the consolidated financial
    statements of the group.

                                 9
GN on Audit of Consolidated Financial Statements (Revised 2016)


(g) review the statutory records maintained by the parent, for
    example registers under section 186, 190 of the
    Companies Act, 2013.
(h) also identify the changes in the shareholding that might
    have taken place during the reporting period.

21. The auditor should document procedures performed for
assessing completeness of the components to be consolidated.

22. There would be various means by which control, joint
control or significant influence can be obtained. In this regard,
the auditor may verify the Board's minutes, shareholder
agreements entered into by the parent, agreements with the
entities to which the parent might have provided any technology
or know how, enforcement of statute, as the case may be, etc.
The auditor may also review the minutes of the meetings of the
Board of Directors subsequent to the year-end to understand if
there has been any liquidation of investments or any further
investments have been made as these may provide further
evidence to understand if the control was meant to be temporary
in nature or otherwise.

23. Where a component is excluded from the consolidated
financial statements, the auditor should examine the reasons
for exclusion and whether such exclusion is in conformity with
the applicable financial reporting framework, for example, under
the Companies (Accounting Standards) Rules, 2006, there
could be two reasons for exclusion of a subsidiary, associate or
jointly controlled entity ­ one, that the relationship of parent with
the subsidiary, associate or jointly controlled entity is intended
to be temporary or the subsidiary, associate or joint venture
operates under severe long-term restrictions which significantly
impair its ability to transfer funds to the parent. Similarly, under
the Companies Act, 2013, intermediate subsidiary in India is not
required to present consolidated financial statements. Ind AS




                                  10
           GN on Audit of Consolidated Financial Statements (Revised 2016)


110 also prescribes certain criteria9 where consolidated
financial statements are not required. In such cases, the auditor
should satisfy himself that the exclusion made by the
management falls within these categories, e.g. in the case of an
entity which is excluded from consolidation on the ground that
the relationship of parent with the other entity as subsidiary,
associate or joint venture is temporary, the auditor should verify
that the intention of the parent, to dispose off the subsidiary,
investment in associate or interest in jointly controlled entity, in
the near future, existed at the time of acquisition of the
subsidiary, making investment in associate or jointly controlled
entity. The auditor should also verify that the reasons for
exclusion are given in the consolidated financial statements. If
an entity is excluded from the consolidated financial statements
for reasons other than those allowed by the applicable financial
reporting framework, the auditor should consider its effect on
the auditor's report to be issued.

24. The auditor should also examine whether there is any
change in the status of a component (e.g., subsidiary to
associate, JV to associates or vice ­ versa). The auditor, in

9
 (a) A parent need not present consolidated financial statements if it meets all
the following conditions:
      (i)    it is a wholly-owned subsidiary or is a partially-owned subsidiary of
             another entity and all its other owners, including those not otherwise
             entitled to vote, have been informed about, and do not object to, the
             parent not presenting consolidated financial statements;
      (ii) its debt or equity instruments are not traded in a public market (a
             domestic or foreign stock exchange or an over-the-counter market,
             including local and regional markets);
      (iii) it did not file, nor is it in the process of filing, its financial statements
             with a securities commission or other regulatory organisation for the
             purpose of issuing any class of instruments in a public market; and
      (iv) its ultimate or any intermediate parent produces consolidated financial
             statements that are available for public use and comply with Ind ASs.
(b) post-employment benefit plans or other long-term employee benefit plans to
      which Ind AS 19, Employee Benefits, applies.
(c) an investment entity need not present consolidated financial statements if it
      is required, in accordance with paragraph 31 of this Ind AS, to measure all
      of its subsidiaries at fair value through profit or loss.



                                          11
GN on Audit of Consolidated Financial Statements (Revised 2016)


such cases, should examine whether these changes have been
appropriately accounted for in the consolidated financial
statements as required by the relevant accounting standards
under the applicable financial reporting framework.
25. (a) In preparing consolidated financial statements in
accordance with the Companies (Accounting Standards) Rules,
2006, the financial statements of the parent and its subsidiaries
are combined on a line by line basis by adding together like items
of assets, liabilities, income, expenses and cash flows and then
certain calculations like determination of goodwill or capital
reserve, minorities interest and adjustments like elimination of
intra group transactions, balances and unrealised profits etc. are
made in accordance with the requirements of Accounting
Standard (AS) 21, "Consolidated Financial Statements".
Investments in associates are accounted for using the Equity
Method as prescribed in Accounting Standard (AS) 23,
"Accounting for Investments in Associates in Consolidated
Financial Statements". A parent that has an interest in a jointly
controlled entity, reports its interest in the consolidated financial
statements using proportionate consolidation method in
accordance with Accounting Standard (AS) 27, "Financial
Reporting of Interests in Joint Ventures". Many of the procedures
appropriate for the application of equity method and the
proportionate consolidation method are similar to the
consolidation procedures set out in Accounting Standard (AS) 21,
"Consolidated Financial Statements".
(b) For consolidation of subsidiaries in accordance with the
Companies (Indian Accounting Standards) Rules, 2015:
    the financial statements of the parent and its subsidiaries are
    combined as per Ind AS 110, "Consolidated Financial
    Statements" on a line by line basis by adding together like
    items of assets, liabilities, income, expenses and cash flows;
    related goodwill/ capital reserve and non-controlling interest
    is determined as per Ind As 103;




                                  12
         GN on Audit of Consolidated Financial Statements (Revised 2016)


    adjustments like elimination of intra group transactions,
    balances, unrealised profits and deferred tax etc. are made in
    accordance with the requirements of Ind AS 110.
    Investments in associates and joint ventures are accounted
    for using the Equity Method as prescribed in Indian
    Accounting Standard (Ind AS) 28, "Investments in Associates
    and Joint Ventures". Interests in assets, liabilities, revenues
    and expenses in a joint operation are accounted for as part of
    separate financial statements of the entity in accordance with
    Indian Accounting Standard (Ind AS) 111, "Joint
    Arrangements".
26. The auditor should verify that the adjustments warranted by
the relevant accounting standards under the applicable financial
reporting framework have been made wherever required and
have been properly approved by the management of the parent.
The preparation of consolidated financial statements gives rise
to permanent consolidation adjustments and current period
consolidation adjustments. No adjustments, other than those
envisaged in this Guidance Note, can be carried out in the
preparation of CFS at the group level.

Special Considerations
Permanent Consolidation Adjustments
27. Permanent consolidation adjustments are those adjustments
that are made only on the first occasion or subsequent occasions
in which there is a change in the shareholding of a particular entity
which is consolidated. Permanent consolidation adjustments are:
(a) Determination of goodwill or capital reserve as per applicable
    accounting standards.
(b) Determination of amount of equity attributable to minority/
    non- controlling interests.
28. The auditor should verify that the above calculations have
been made appropriately. The auditor should pay particular
attention to the determination of pre-acquisition reserves of the
components. Date(s) of investment in components assumes





                                  13
GN on Audit of Consolidated Financial Statements (Revised 2016)


importance in this regard. The auditor should also examine
whether the pre-acquisition reserves have been allocated
appropriately between the parent and the minority interests/
non-controlling interests of the subsidiary. The auditor should
also verify the changes that might have taken place in these
permanent consolidation adjustments on account of subsequent
acquisition of shares in the components, disposal of the
components in the subsequent years.
29. It may happen that while working out the permanent
consolidation adjustments, in the case of one subsidiary,
goodwill arises and in the case of another subsidiary a capital
reserve arises. The parent may choose to net off these
amounts to disclose a single amount in the consolidated
balance sheet where permitted by the applicable financial
reporting framework. In such cases, the auditor should verify
that the gross amounts of goodwill and capital reserves arising
on acquisition of various subsidiaries have been disclosed in
the notes to the consolidated financial statements to reflect the
excess/shortage over the parents' portion of the subsidiary's
equity.
Current Period Consolidation Adjustments
30. Current period consolidation adjustments are those
adjustments that are made in the accounting period for which
the consolidation of financial statements is done. Current period
consolidation adjustments primarily relate to elimination of intra-
group transactions and account balances including:
(a) intra-group interest paid and received, or management
    fees, etc.;
(b) unrealised intra-group profits on              assets     acquired/
    transferred from/ to other subsidiaries;
(c) intra-group indebtedness;
(d) adjustments related to harmonising the different accounting
    policies being followed by the parent and its components;
(e) adjustments to the financial statements (of the parent and the
    components being consolidated) for recognized subsequent
    events or transactions that occur between the balance sheet


                                  14
         GN on Audit of Consolidated Financial Statements (Revised 2016)


    date and the date of the auditor's report on the consolidated
    financial statements of the group.
    There are two types of subsequent events:
    a.   The first type of subsequent events consists of events or
         transactions that provide additional evidence about
         conditions that existed at the date of the financial
         statements, including the estimates inherent in the
         process of preparing financial statements (i.e. adjusting
         events).
    b.   The second type of subsequent events consists of events
         that provide evidence about conditions that did not exist
         at the date of the financial statements but arose
         subsequent to that date (i.e. non-adjusting events).
    Events occurring after balance sheet date which do not
    require adjustments would not normally require disclosure,
    although they may be of such significance that they may
    require a disclosure in the report of approving authority in the
    case of accounting standards and in the financial statements
    in case of Ind AS. For such events, the following shall be
    disclosed:
    a.   The nature of the event; and
    b.   An estimate of its financial effect or a statement that such
         an estimate cannot be made.
(f) adjustments for the effects of significant transactions or other
    events that occur between the date of the components
    balance sheet and not already recognised in its financial
    statements and the date of the auditor's report on the group's
    consolidated financial statements when the financial
    statements of the component to be used for consolidation are
    not drawn upto the same balance sheet date as that of the
    parent;
(g) In case of a foreign component, adjustments to convert a
    component's audited financial statements prepared under the
    component's local GAAP to the GAAP under which the
    consolidated financial statements are prepared.

                                  15
GN on Audit of Consolidated Financial Statements (Revised 2016)


(h) determination of movement in equity attributable to the
    minorities interest/non-controlling interest since the date of
    acquisition of the subsidiary.
(i)   adjustments of deferred tax on account of temporary
      differences arising out of elimination of profit and losses
      resulting from intragroup transactions and undistributed
      profits of the component in case of consolidated financial
      statements prepared under Ind AS.
31. The adjustments required for preparation of consolidated
financial statements are made in memorandum records kept for
the purpose by the parent. The auditor should review the
memorandum records to verify the adjustment entries made in
the preparation of consolidated financial statements. Apart from
reviewing the memorandum records, the auditor should inter
alia:
(a) verify that the intra group transactions and account
    balances have been eliminated;
(b) verify that the consolidated financial statements have been
    prepared using uniform accounting policies for like
    transactions and other events in similar circumstances;
(c) verify that adequate disclosures have been made in the
    consolidated financial statements of application of different
    accounting policies in case, it was impracticable to
    harmonize them. Applying a requirement is impracticable
    when the entity cannot apply it after making every
    reasonable effort to do so10.


10
   AS 21/ AS 23/ AS 27 permit application of different accounting policies, if it
is impractical to use uniform accounting policies, that fact should be
disclosed together with the proportion of the items in the consolidated
financial statements to which the different accounting policies have been
applied. Ind AS 28 permits that financial statement of an associate can be
prepared using different accounting policies if it is impractical to do so
however adjustment shall be made to make the accounting policies confirm
to those of parent when the financial statements are used by parent in
applying the equity method.



                                      16
         GN on Audit of Consolidated Financial Statements (Revised 2016)


(d) verify the adjustments made to harmonise the different
    accounting policies including adjustments made by
    management to convert a component's financial statements
    prepared under the component's GAAP to the GAAP under
    which the consolidated financial statements are prepared;
(e) verify the calculation of minorities/non-controlling interest;
(f) verify adjustments relating to deferred tax on account of
    temporary differences arising out of elimination of profit and
    losses resulting from Intergroup transactions (where the
    parent's accounts are maintained in Ind AS);
(g) verify that income and expenses of the subsidiary are
    included in consolidated financial statements from the date it
    gains control until the date when the entity ceases to control
    the subsidiary and further such income and expenses are
    based on the amounts of the assets and liabilities recognised
    in consolidated financial statements at the acquisition date11.
32. The auditor should gain an understanding of the
procedures adopted by the management of the enterprise to
make the above mentioned adjustments. This helps the auditor
in reducing the audit risk to an acceptably low level.
33. One of the important adjustment that may be required in
the current period is determination of impairment loss that might
exist for goodwill arising on consolidation. Goodwill arising on
consolidation is carried at the value determined at the date of
acquisition of the component, and the same is to be tested for
impairment loss at every balance sheet date.
34. The auditor should examine whether any impairment loss
has been determined by the parent. If yes, the auditor should
examine the procedure followed for determination of impairment
loss. The auditor should satisfy himself that the amount of
impairment loss determined is fair. In case the impairment loss

11
  Where the consolidated financial statements are prepared under Indian
Accounting Standards.



                                  17
GN on Audit of Consolidated Financial Statements (Revised 2016)


in goodwill of a component has been determined in foreign
currency, the auditor should verify if any amount of loss in local
currency need to be adjusted from currency translation reserve
on account of movement in the exchange rate from the date
when the goodwill was first accounted for in the consolidated
financial statement of parent, to the date of determination of
impairment loss.
35. The auditor should also perform audit procedures to
understand and verify whether Intragroup losses are indicating
an impairment loss that requires recognition in the consolidated
financial statements.
36. Apart from verifying that the calculation and disclosures
regarding minorities/non-controlling interest have been made
appropriately, the auditor also determines, in cases where the
minority interests' share of the losses exceed the minority /non-
controlling interests' share of the equity, the excess, and any
further losses applicable to the minority interest, have been
accounted for in accordance with the relevant accounting
standards.
37. The financial statements of the components used in the
consolidation should be drawn up to the same reporting date as
that of the parent. If it is not practicable to draw up the financial
statements of one or more components to such date and,
accordingly, those financial statements are drawn up to different
reporting dates, adjustments should be made for the effects of
significant transactions or other events that occur between those
dates and the date of the parent's financial statements. In any
case, the difference between reporting dates should not be more
than six months in case of financial statements under AS and
three months in case of financial statements under Ind AS. The
auditor of the consolidated financial statements should review
other components' results between its financial reporting date and
that of the parent for significant transactions or other events that
have taken place during the period and, therefore, need to be
reflected in the consolidated financial statements. Recognition
should be given by disclosure or otherwise to the effect of


                                  18
        GN on Audit of Consolidated Financial Statements (Revised 2016)


intervening events which materially affect the financial position,
results of operations or cash flows.
38. The fundamental accounting assumption of "consistency"
requires the auditor of the consolidated financial statements to
consider whether the length of the reporting periods and any
difference in financial year-ends are the same from period to
period. If there have been any changes in the respective reporting
periods of the components included in the consolidated financial
statements that have a material effect on the financial statements,
the auditor should ensure that the entity discloses such changes
and the manner of treatment in the financial statements.
39. The Ministry of Corporate Affairs has issued a Circular
number 39/2014 dated October 14, 2014 stating that Schedule III
to the Act read with the applicable Accounting Standards does
not envisage that a company while preparing its consolidated
financial statements merely repeats the disclosures made by it
under separate financial statements being consolidated. In the
consolidated financial statements, the company would need to
give all disclosures relevant to consolidated financial statements
only.
40. Further, Accounting Standard (AS) 21 also lays down certain
principles that should be observed while giving the information
which is part of the separate financial statements of the
Components but that need not be reported in the notes and other
explanatory material of the consolidated financial statements.
The auditor should:
(a) examine that the notes required by the applicable standards
    which are necessary for presenting a true and fair view of
    the consolidated financial statements have been included in
    the consolidated financial statements as an integral part
    thereof; and
(b) examine that additional statutory information disclosed in
    the separate financial statements of the subsidiary and/or a
    parent having bearing on the true and fair view of the



                                 19
GN on Audit of Consolidated Financial Statements (Revised 2016)


       consolidated financial statements have been disclosed in
       the consolidated financial statements.
41. In addition, the information required pursuant to Schedule III
to the Companies Act, 2013 (`general instructions for the
preparation of consolidated financial statements') should be
disclosed. For example, following information is also required to
be disclosed in the consolidated financial statements separately
for the parent and each of its components (including foreign
component) which has been consolidated:
(i)    amount of net assets and net assets as a percentage of
       consolidated net assets;
(ii) amount of share in profit or loss and the percentage share in
     profit or loss as a percentage of consolidated profit or loss;
(iii) amount in other comprehensive income (OCI) and the
      percentage of OCI as a percentage of Consolidated OCI.12
42. As regards consolidation adjustments (including elimination of
intra group transactions), it should be ensured that these are
either disclosed as a single line item separately or adjusted in the
information (e.g. net assets) disclosed for the parent and its each
component.
43. The Ind AS 110 does not give a list of information which is
part of the separate financial statement of the components but
that need not be reported in the notes and other explanatory
material of the consolidated financial statements, however,
based on section 129(4) and MCA circular 39/2014 as referred
above, it can be construed that, even in consolidated financial
statements under Ind AS, only those disclosures should be given
which are relevant to consolidated financial statements.
44. Based on the above discussion, in case of companies, the
information such as the following given in the notes to the



12
     For companies which are covered by Ind AS.



                                       20
          GN on Audit of Consolidated Financial Statements (Revised 2016)


separate financial statements of the parent and/or the subsidiary,
need not be included in the consolidated financial statements.
(i)   Source from which bonus shares are issued, e.g.,
      capitalisation of profits or Reserves or from Securities
      Premium Account.
(ii) Disclosure of all unutilised monies out of the issue indicating
     the form in which such unutilised funds have been invested.
(iii) Disclosure required under Micro, Small and Medium
      Enterprises Development Act, 2006.
(iv) A statement of investments (whether shown under "financial
     assets or non-financial assets as stock-in-trade) separately
     classifying trade investments and other investments,
     showing the names of the bodies corporate (indicating
     separately the names of the bodies corporate under the
     same management) in whose shares or debentures,
     investments have been made (including all investments,
     whether existing or not, made subsequent to the date as at
     which the previous balance sheet was made out) and the
     nature and extent of the investment so made in each such
     body corporate.
(v) Value of imports calculated on C.I.F. basis by the company
    during the financial year in respect of:

      (a) raw materials;
      (b) components and spare parts;
      (c) capital goods.
(vi) Expenditure in foreign currency during the financial year on
     account of royalty, know-how, professional and consultation
     fees, interest, and other matters.
(vii) Value of all imported raw materials, spare parts and
      components consumed during the financial year and the
      value of all indigenous raw materials, spare parts and
      components similarly consumed and the percentage of each
      to the total consumption.

                                   21
GN on Audit of Consolidated Financial Statements (Revised 2016)


(viii) The amount remitted during the year in foreign currencies on
       account of dividends, with a specific mention of the number
       of non-resident shareholders, the number of shares held by
       them on which the dividends were due and the year to which
       the dividends related.
(ix) Earnings in foreign exchange classified under the following
     heads, namely:-
    (a) export of goods calculated on F.O.B. basis;
    (b) royalty, know-how, professional and consultation fees;
    (c) interest and dividend;
    (d) other income, indicating the nature thereof.
However, notwithstanding the above, the auditor needs to ensure
compliance with disclosure requirements of applicable
accounting standards and other applicable laws for consolidated
financial statements.

Management Representations
45. Standard on Auditing (SA) 580, "Written Representations"
requires the auditor to obtain appropriate representations from
management. The auditor of the consolidated financial
statements should obtain evidence that the management of the
parent acknowledges its responsibility for a true and fair
presentation of the consolidated financial statements in
accordance with the financial reporting framework applicable to
the parent and that parent's management has approved the
consolidated financial statements. In addition, the auditor of the
consolidated financial statements should obtain written
representations from parent's management on matters material
to the consolidated financial statements. Examples of such
representations include:
(a) Completeness of components included in the consolidated
    financial statements;
(b) Identification of reportable segments for segment reporting;



                                  22
        GN on Audit of Consolidated Financial Statements (Revised 2016)


(c) Identification of related         parties   and   related    party
    transactions for reporting;
(d) Appropriateness and completeness of permanent and
    current period consolidation adjustments, including the
    elimination of intra-group transactions.

Reporting
46. With reference to the auditor's responsibility under
paragraph 8, there could be two situations in an audit of
consolidated financial statements­-when the parent's auditor is
also the auditor of all the components to be included in the
consolidated financial statements and when the parent's auditor
is not the auditor of one or more components and therefore,
uses the work of other auditors in the audit. The auditor should,
while preparing the report, consider the requirements of
Standard on Auditing (SA) 700, "Forming an Opinion and
Reporting on Financial Statements", SA 705, "Modifications to
the Opinion in the Independent Auditor's Report and SA 706,
"Emphasis of Matter Paragraphs and Other Matter Paragraphs
in the Independent Auditor's Report. Where, the auditor uses
the work of other auditors in the audit of consolidated financial
statements, the requirements of Standard on Auditing (SA) 600,
"Using the Work of Another Auditor" should also be considered.
Reference may also be made to paragraph 16 for using the
work of another auditor.

When the Parent's Auditor is also the Auditor of
All its components
47. While drafting the audit report, the auditor should report
whether principles and procedures for preparation and
presentation of consolidated financial statements as laid down
in the relevant accounting standards have been followed. In
case of any departure, the auditor should consider the same
while drafting the audit report.

48. Auditor should issue an audit report expressing an opinion
whether the consolidated financial statements give a true and

                                 23
GN on Audit of Consolidated Financial Statements (Revised 2016)


fair view of the state of affairs of the Group as on balance sheet
date and as to whether consolidated profit and loss statement
gives true and fair view of the results of consolidated profit or
losses of the Group for the period under audit. Where the
consolidated financial statements also include a cash flow
statement, the auditor should also give his opinion on the true
and fair view of the cash flows presented by the consolidated
cash flow statement. Suggested format of the audit report to be
issued in such circumstance is given in Appendix I to this
Guidance Note.

When the Parent's Auditor is not the Auditor of All
its Components
49. In a case where the parent's auditor is not the auditor of all
the components included in the consolidated financial
statements, the auditor of the consolidated financial statements
should consider the requirements of SA 600.

50. As prescribed in SA 706, if the auditor considers it
necessary to make reference to the audit of the other auditors,
the auditor's report on the consolidated financial statements
should disclose clearly the magnitude of the portion of the
financial statements audited by the other auditor(s). This may
be done by stating aggregate rupee amounts or percentages of
total assets, revenues and cash flows of components included
in the consolidated financial statements not audited by the
parent's auditor. Total assets, revenues and cash flows not
audited by the parent's auditor should be presented before
giving effect to permanent and current period consolidation
adjustments. Reference in the report of the auditor on the
consolidated financial statements to the fact that part of the
audit of the group was made by other auditor(s) is not to be
construed as a qualification of the opinion but rather as an
indication of the divided responsibility between the auditors of
the parent and its subsidiaries. Suggested format of the audit
report to be issued by the auditor of the consolidated financial

                                  24
        GN on Audit of Consolidated Financial Statements (Revised 2016)


statements in this circumstance is given in Appendix I to this
Guidance Note.

When the Component(s) Auditor Reports on
Financial Statements under an Accounting
Framework Different than that of the Parent
51. The parent may have components located in multiple
geographies outside India applying an accounting framework
(GAAP) that is different than that of the parent in preparing its
financial statements. Foreign components prepare financial
statements under different financial reporting frameworks, which
may be a well-known framework (such as US GAAP or IFRS) or
the local GAAP of the jurisdiction of the component. Local
component auditors may be unable to report on financial
statements prepared using the parent's GAAP because of their
unfamiliarity with such GAAP.
52. When a component's financial statements are prepared under
an accounting framework that is different than that of the
framework used by the parent in preparing group's consolidated
financial statements, the parent's management perform a
conversion of the components' audited financial statements from
the framework used by the component to the framework under
which the consolidated financial statements are prepared. The
conversion adjustments are audited by the principal auditor to
ensure that the financial information of the component(s) is
suitable and appropriate for the purposes of consolidation.
Suggested format of the audit report to be issued by the auditor
of the consolidated financial statements in this circumstance is
given in Appendix I to this Guidance Note.
53. A component may alternatively prepare financial statements
on the basis of the parent's accounting policies, as outlined in the
group accounting manual, to facilitate the preparation of the
group's consolidated financial statements. The group accounting
manual would normally contain all accounting policies, including
relevant disclosure requirements, which are consistent with the
requirements of the financial reporting framework under which the


                                 25
GN on Audit of Consolidated Financial Statements (Revised 2016)


group's consolidated financial statements are prepared. The local
component auditor can then audit and issue an audit report on the
components financial statements prepared in accordance with
"group accounting policies".
54. When applying the approach in paragraph 53 above of using
group accounting policies as the financial accounting framework
for components to report under, the principal/parent auditors
should perform procedures necessary to determine compliance of
the group accounting policies with the GAAP applicable to the
parent's financial statements. This ensures that the information
prepared under the requirements of the group accounting policies
will be directly usable and relevant for the preparation of
consolidated financial statements by the parent entity, eliminating
the need for auditing by the auditor, the differences between the
basis used for the component's financial statements and that of
the consolidated financial statements. The Principal auditor can
then decide whether or not to rely on the components' audit
report and make reference to it in the auditor's report on the
consolidated financial statements. See paragraph 50 for
additional guidance.

When the Component(s) Auditor Reports under an
Auditing Framework Different than that of the
Parent
55. Normally, audits of financial statements, including
consolidated financial statements, are performed under auditing
standards generally accepted in India ("Indian GAAS"). In order to
maintain consistency of the auditing framework and to enable the
parent auditor to rely and refer to the other auditor's audit report in
their audit report on the consolidated financial statements, the
components' financial statements should also be audited under a
framework that corresponds to Indian GAAS.

Components Not Audited
56. Generally, the financial statements of all components
included in consolidated financial statements should be audited or
subjected to audit procedures in the context of a multi-location

                                  26
          GN on Audit of Consolidated Financial Statements (Revised 2016)


group audit. Such audits and audit procedures can be performed
by the auditor reporting on the consolidated financial statements
or by the components' auditor.
57. Where the financial statements of one or more components
continue to remain unaudited, the auditor reporting on the
consolidated financial statements should consider unaudited
components in evaluating a possible modification to his report on
the consolidated financial statements. The evaluation is necessary
because the auditor (or other auditors, as the case may be) has
not been able to obtain sufficient appropriate audit evidence in
relation to such consolidated amounts/balances. In such cases,
the auditor should evaluate both qualitative and quantitative
factors on the possible effect of such amounts remaining
unaudited when reporting on the consolidated financial statements
using the guidance provided in SA 705, "Modifications to the
Opinion in the Independent Auditor's Report"13.







13
   Refer Announcement on the Manner of Disclosure in the Auditor's Report of
the Fact of Inclusion of Unaudited Financial Statements / Information of
Component/s in the Financial Statements audited by the Principal Auditor(s)
issued by ICAI in February 2014.



                                    27
                                                               Appendix I
     Illustrative Formats of Independent Auditor's
     Report on Consolidated Financial Statements

                  Illustration 1: Unmodified Opinion
     Note:
     The following illustrative format is based on the assumptions
     that all components have been audited by the Principal
     Auditor.
     The independent auditor of Consolidated Financial Statements:
         Gives an Unmodified Opinion on the consolidated financial
         statements



ILLUSTRATIVE FORMAT OF INDEPENDENT AUDITOR'S
REPORT ON       THE   CONSOLIDATED FINANCIAL
STATEMENTS OF A GROUP UNDER THE COMPANIES
ACT, 2013 AND THE RULES THEREUNDER

INDEPENDENT AUDITOR'S REPORT

TO THE MEMBERS OF ABC COMPANY LIMITED

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated Ind AS 14
financial statements of ABC Company Limited (hereinafter
referred to as "the Holding Company") and its subsidiaries (the
Holding Company and its subsidiaries together referred to as
"the Group") its associates and its jointly controlled entities/joint
ventures and joint operations15, comprising the Consolidated

14
     if applicable.
15
     As the case may be as per the relevant accounting standards.
          GN on Audit of Consolidated Financial Statements (Revised 2016)


Balance Sheet as at 31st March, 20XX, the Consolidated
Statement of Profit and Loss (including other comprehensive
income)16, the Consolidated Cash Flow Statement, the
Consolidated Statement of Changes in Equity17, for the year then
ended, and a summary of the significant accounting policies and
other explanatory information (hereinafter referred to as "the
consolidated financial statements").

Management's Responsibility                   for    the     Consolidated
Financial Statements
The Holding Company's Board of Directors is responsible for
the preparation of these consolidated financial statements in
terms of the requirements of the Companies Act, 2013 (hereinafter
referred to as "the Act") that give a true and fair view of the
consolidated     financial     position,     consolidated     financial
performance     (including     other     comprehensive      income)18,
consolidated cash flows and consolidated statement of changes
in equity19 of the Group including its Associates and Jointly
controlled entities/ Joint ventures and Joint operations20 in
accordance with the accounting principles generally accepted in
India, including the Accounting Standards prescribed under
Section 133 of the Act, read with Rule 7 of the Companies
(Accounts) Rules, 2014 / Indian Accounting Standards specified
under Section 133 of the Act21. The respective Board of Directors
of the companies included in the Group and of its associates
and jointly controlled entities /joint ventures and joint operations22
are responsible for maintenance of adequate accounting records
in accordance with the provisions of the Act for safeguarding the
assets of the Group and its associates and its jointly controlled

16
   if applicable.
17
   if applicable.
18
   if applicable.
19
   if applicable.
20
   As the case may be as per the relevant accounting standards.
21
   Select as applicable.
22
   As the case may be as per the relevant accounting standards.



                                      29
GN on Audit of Consolidated Financial Statements (Revised 2016)


entities/joint ventures and joint operations23 and for preventing
and detecting frauds and other irregularities; the selection and
application of appropriate accounting policies; making judgments
and estimates that are reasonable and prudent; and the design,
implementation and maintenance of adequate internal financial
controls, that were operating effectively for ensuring the accuracy
and completeness of the accounting records, relevant to the
preparation and presentation of the financial statements that
give a true and fair view and are free from material
misstatement, whether due to fraud or error, which have been
used for the purpose of preparation of the consolidated financial
statements by the Directors of the Holding Company, as aforesaid.
Auditor's Responsibility
Our responsibility is to express an opinion on these
consolidated financial statements based on our audit. While
conducting the audit, we have taken into account the provisions of
the Act, the accounting and auditing standards and matters
which are required to be included in the audit report under the
provisions of the Act and the Rules made thereunder.
We conducted our audit in accordance with the Standards on
Auditing specified under Section 143(10) of the Act. Those
Standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit
evidence about the amounts and the disclosures in the
consolidated financial statements. The procedures selected
depend on the auditor's judgment, including the assessment of
the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal financial control
relevant to the Holding Company's preparation of the


23
     As the case may be as per the relevant accounting standards.



                                        30
             GN on Audit of Consolidated Financial Statements (Revised 2016)


consolidated financial statements that give a true and fair view in
order to design audit procedures that are appropriate in the
circumstances. An audit also includes evaluating the
appropriateness of the accounting policies used and the
reasonableness of the accounting estimates made by the Holding
Company's Board of Directors, as well as evaluating the overall
presentation of the consolidated financial statements.
We believe that the audit evidence obtained by us is sufficient
and appropriate to provide a basis for our audit opinion on the
consolidated financial statements.
Opinion
In our opinion and to the best of our information and according
to the explanations given to us, the aforesaid consolidated
financial statements give the information required by the Act in
the manner so required and give a true and fair view in
conformity with the accounting principles generally accepted in
India, of the consolidated state of affairs (financial position) of the
Group, its associates and jointly controlled entities /joint
ventures and joint operations 24 as at 31st March, 20XX, and
their consolidated profit/loss (financial performance including
other comprehensive income)25, their consolidated cash flows
and consolidated statement of changes in equity26 for the year
ended on that date.

Report on Other Legal and Regulatory Requirements
As required by Section 143(3) of the Act, we report, to the extent
applicable, that:
(a) We have sought and obtained all the information and
    explanations which to the best of our knowledge and belief
    were necessary for the purposes of our audit of the
    aforesaid consolidated financial statements.

24
     As the case may be as per the relevant accounting standards.
25
     if applicable.
26
     if applicable.



                                        31
GN on Audit of Consolidated Financial Statements (Revised 2016)


(b) In our opinion, proper books of account as required by law
    relating to preparation of the aforesaid consolidated financial
    statements have been kept so far as it appears from our
    examination of those books and the reports of the other
    auditors.

(c) The Consolidated Balance Sheet, the Consolidated
    Statement of Profit and Loss, the Consolidated Cash Flow
    Statement, and Consolidated Statement of Changes in
    Equity27 dealt with by this Report are in agreement with the
    relevant books of account maintained for the purpose of
    preparation of the consolidated financial statements.

(d) In our opinion, the aforesaid consolidated financial
    statements comply with the Accounting Standards specified
    under Section 133 of the Act, read with Rule 7 of the
    Companies (Accounts) Rules, 2014 /Indian Accounting
    Standards specified under Section 133 of the Act28.

(e) On the basis of the written representations received from the
    directors of the Holding Company as on 31st March, 20XX
    taken on record by the Board of Directors of the Holding
    Company and the reports of the statutory auditors of its
    subsidiary companies, associate companies and jointly
    controlled entities/ joint ventures and joint operations
    incorporated in India, none of the directors of the Group
    companies, its associate companies and jointly controlled
    entities/ joint venture and joint operations29 incorporated in
    India is disqualified as on 31st March 20XX from being
    appointed as a director in terms of Section 164 (2) of the Act.

(f) With respect to the adequacy of the internal financial controls
    over financial reporting of the Holding Company, its subsidiary

27
     if applicable.
28
     Select as applicable.
29
     As the case may be as per the relevant accounting standards.



                                        32
           GN on Audit of Consolidated Financial Statements (Revised 2016)


     companies, associate companies and jointly controlled
     entities/ joint ventures and joint operations30 incorporated in
     India and the operating effectiveness of such controls, refer to
     our separate Report in "Annexure A".

(g) With respect to the other matters to be included in the
    Auditor's Report in accordance with Rule 11 of the
    Companies (Audit and Auditor's) Rules, 2014, in our opinion
    and to the best of our information and according to the
    explanations given to us:
     i.    The consolidated financial statements disclose the
           impact of pending litigations on the consolidated
           financial position of the Group, its associates and jointly
           controlled entities /joint ventures and joint operations31 -
           Refer Note XX to the consolidated financial statements.
           Or
           There were no pending litigations as at 31st March,
           20XX which would impact the consolidated financial
           position of the Group, its associates and jointly
           controlled entities /joint ventures and joint operations32.
     ii.   Provision has been made in the consolidated financial
           statements, as required under the applicable law or
           accounting standards, for material foreseeable losses, if
           any, on long-term contracts including             derivative
           contracts - Refer (a) Note XX to the consolidated
           financial statements in respect of such items as it
           relates to the Group, its associates and jointly controlled
           entities /joint ventures and joint operations33 and (b) the
           Group's share of net profit/loss in respect of its
           associates.

30
   As the case may be as per the relevant accounting standards.
31
   As the case may be as per the relevant accounting standards.
32
   As the case may be as per the relevant accounting standards.
33
   As the case may be as per the relevant accounting standards.



                                      33
GN on Audit of Consolidated Financial Statements (Revised 2016)


               Or
               The Group, its associates and jointly controlled
               entities/joint ventures and joint operations34 did not have
               any material foreseeable losses on long-term contracts
               including derivative contracts during the year ended 31st
               March, 20XX .

        iii.   There are no amounts which are required to be
               transferred to the Investor Education and Protection Fund
               by the Holding Company and its subsidiary companies,
               associate companies and jointly controlled entities/ joint
               ventures and joint operations35 incorporated in India
               during the year ended 31st March 20XX.

               Or

               There has been no delay in transferring amounts to the
               Investor Education and Protection Fund by the Holding
               Company and its subsidiary companies, associate
               companies and jointly controlled entities/ joint ventures
               and joint operations36 incorporated in India during the year
               ended 31st March 20XX.

               Or

               The following are the instances of delay in transferring
               amounts, to the Investor Education and Protection Fund
               by the Holding Company and its subsidiary companies,
               associate companies and jointly controlled entities/ joint
               ventures and joint operations37 incorporated in India
               during the year ended 31st March 20XX: [describe the


34
     As the case may be as per the relevant accounting standards.
35
     As the case may be as per the relevant accounting standards.
36
     As the case may be as per the relevant accounting standards.
37
     As the case may be as per the relevant accounting standards.



                                        34
             GN on Audit of Consolidated Financial Statements (Revised 2016)


             delays, covering date of payment, amount involved and
             number of days' delay.]


                                                            For XYZ & Co
                                                   Chartered Accountants
                                                  (Firm's Registration No.)


                                                           Signature
                        (Name of the Member Signing the Audit Report)
                                                           (Designation38)
                                                 (Membership No. XXXXX)
Place of Signature:
Date:




38
     Partner or Proprietor as the case may be.



                                         35
GN on Audit of Consolidated Financial Statements (Revised 2016)


              Illustration 2: Unmodified Opinion

  Note:
  The following illustrative format is based on the assumptions that
  the Group has:
      Certain components which have been audited by auditor/s
      other than the Principal Auditor and such component/s is/
      are material to the consolidated financial statements of
      the Group. The auditors of such components which are
      Indian companies, and they did not have any matter to
      report under section 143(3)(f) of the Companies Act,
      2013.

      Certain components which are unaudited and such
      component/s is/ are not material to the consolidated
      financial statements of the Group.
  The independent auditor of Consolidated Financial Statements:
      Gives an Unmodified Opinion on the consolidated financial
      statements.

      Discloses the aforementioned facts about the Components
      in the "Other Matters" Paragraph in accordance with the
      Announcement issued by the Auditing and Assurance
      Standards Board under the authority of the Council of
      ICAI in February 2014.



ILLUSTRATIVE FORMAT OF INDEPENDENT AUDITOR'S
REPORT ON       THE   CONSOLIDATED FINANCIAL
STATEMENTS OF A GROUP UNDER THE COMPANIES
ACT, 2013 AND THE RULES THEREUNDER

INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF ABC COMPANY LIMITED



                                  36
          GN on Audit of Consolidated Financial Statements (Revised 2016)


Report on the Consolidated Financial Statements
We have audited the accompanying consolidated Ind AS 39
financial statements of ABC Company Limited (hereinafter
referred to as "the Holding Company") and its subsidiaries (the
Holding Company and its subsidiaries together referred to as
"the Group") its associates and its jointly controlled entities/joint
ventures and joint operations40, comprising the Consolidated
Balance Sheet as at 31st March, 20XX, the Consolidated
Statement of Profit and Loss (including other comprehensive
income)41, the Consolidated Cash Flow Statement, Consolidated
Statement of Changes in Equity42, for the year then ended, and a
summary of the significant accounting policies and other
explanatory information (hereinafter referred to as "the
consolidated financial statements").
Management's Responsibility                   for    the     Consolidated
Financial Statements
The Holding Company's Board of Directors is responsible for
the preparation of these consolidated financial statements in
terms of the requirements of the Companies Act, 2013 (hereinafter
referred to as "the Act") that give a true and fair view of the
consolidated     financial   position,  consolidated    financial
performance     (including other comprehensive income)43,
consolidated cash flows and consolidated statement of changes
in equity44 of the Group including its Associates and Jointly
controlled entities /Joint ventures and Joint operations45 in
accordance with the accounting principles generally accepted in
India, including the Accounting Standards specified under
Section 133 of the Act, read with Rule 7 of the Companies

39
   if applicable.
40
   As the case may be as per the relevant accounting standards.
41
   if applicable.
42
   if applicable.
43
   if applicable.
44
   if applicable.
45
   As the case may be as per the relevant accounting standards.



                                      37
GN on Audit of Consolidated Financial Statements (Revised 2016)


(Accounts) Rules, 2014 / Indian Accounting Standards prescribed
under Section 133 of the Act46. The respective Board of Directors
of the companies included in the Group and of its associates
and jointly controlled entities /joint ventures and joint operations47
are responsible for maintenance of adequate accounting records
in accordance with the provisions of the Act for safeguarding the
assets of the Group and i t s a s s o ci a t es and its jointly
controlled entities/joint ventures and joint operations48 and for
preventing and detecting frauds and other irregularities; the
selection and application of appropriate accounting policies;
making judgments and estimates that are reasonable and
prudent; and the design, implementation and maintenance of
adequate internal financial controls, that were operating effectively
for ensuring the accuracy and completeness of the accounting
records, relevant to the preparation and presentation of the
financial statements that give a true and fair view and are
free from material misstatement, whether due to fraud or error,
which have been used for the purpose of preparation of the
consolidated financial statements by the Directors of the Holding
Company, as aforesaid.
Auditor's Responsibility
Our responsibility is to express an opinion on these
consolidated financial statements based on our audit. While
conducting the audit, we have taken into account the provisions of
the Act, the accounting and auditing standards and matters
which are required to be included in the audit report under the
provisions of the Act and the Rules made thereunder.
We conducted our audit in accordance with the Standards on
Auditing specified under Section 143(10) of the Act. Those
Standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance about


46
   Select as applicable.
47
   As the case may be as per the relevant accounting standards.
48
   As the case may be as per the relevant accounting standards.



                                      38
             GN on Audit of Consolidated Financial Statements (Revised 2016)


whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit
evidence about the amounts and the disclosures in the
consolidated financial statements. The procedures selected
depend on the auditor's judgment, including the assessment of
the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal financial control
relevant to the Holding Company's preparation of the
consolidated financial statements that give a true and fair view in
order to design audit procedures that are appropriate in the
circumstances. An audit also includes evaluating the
appropriateness of the accounting policies used and the
reasonableness of the accounting estimates made by the Holding
Company's Board of Directors, as well as evaluating the overall
presentation of the consolidated financial statements.
We believe that the audit evidence obtained by us and the audit
evidence obtained by the other auditors in terms of their reports
referred to in sub-paragraph (a) of the Other Matters paragraph
below, is sufficient and appropriate to provide a basis for our
audit opinion on the consolidated financial statements.
Opinion
In our opinion and to the best of our information and according
to the explanations given to us and based on the consideration of
reports of other auditors on separate financial statements and on
the other financial information of the subsidiaries, associates and
jointly controlled entities/joint ventures and joint operations49, the
aforesaid consolidated financial statements give the information
required by the Act in the manner so required and give a true
and fair view in conformity with the accounting principles generally
accepted in India, of the consolidated state of affairs (financial
position) of the Group, its associates and jointly controlled entities

49
     As the case may be as per the relevant accounting standards.



                                        39
GN on Audit of Consolidated Financial Statements (Revised 2016)


/joint ventures and joint operations50 as at 31st March, 20XX, and
their consolidated profit/loss (financial performance including
other comprehensive income)51, their consolidated cash flows
and consolidated statement of changes in equity52 for the year
ended on that date.
Other Matters
(a) We did not audit the financial statements/ financial information
    of _______subsidiaries, and ______jointly controlled entities
    /joint operations 53, whose financial statements/ financial
    information reflect total assets of Rs._____ and net assets of
    Rs. _____ as at 31st March, 20XX, total revenues of Rs.
    ___ and net cash outflows/(inflows)54 amounting to Rs.
    _____for the year ended on that date, as considered in the
    consolidated financial statements. The consolidated financial
    statements also include the Group's share of net profit/loss of
    Rs. ___ for the year ended 31st March, 20XX, as
    considered in the consolidated financial statements, in
    respect of____ associates and joint ventures, whose financial
    statements / financial information have not been audited by
    us. These financial statements / financial information have
    been audited by other auditors whose reports have been
    furnished to us by the Management and our opinion on the
    consolidated financial statements, in so far as it relates to
    the amounts and disclosures included in respect of these
    subsidiaries, jointly controlled entities /joint ventures and
    joint operations 55 and associates, and our report in terms of
    sub-section (3) of Section 143 of the Act, insofar as it
    relates to the aforesaid subsidiaries, jointly controlled
    entities /joint ventures and joint operations56 and associates,

50
   As the case may be as per the relevant accounting standards.
51
   if applicable.
52
   if applicable.
53
   As the case may be as per the relevant accounting standards.
54
   Please delete what is not applicable in the given case.
55
   As the case may be as per the relevant accounting standards.
56
   As the case may be as per the relevant accounting standards.



                                      40
             GN on Audit of Consolidated Financial Statements (Revised 2016)


        is based solely on the reports of the other auditors.
        Certain of these subsidiaries/associates/ joint ventures and
        joint operations are located outside India whose financial
        statements and other financial information have been
        prepared in accordance with accounting principles generally
        accepted in their respective countries and which have been
        audited by other auditors under generally accepted auditing
        standards applicable in their respective countries. The
        Company's management has converted the financial
        statements of such subsidiaries/associates/ joint ventures and
        joint operations located outside India from accounting
        principles generally accepted in their respective countries to
        accounting principles generally accepted in India. We have
        audited these conversion adjustments made by the
        Company's management. Our opinion in so far as it relates to
        the balances and affairs of such subsidiaries/associates/ joint
        ventures and joint operations located outside India is based
        on the report of other auditors and the conversion
        adjustments prepared by the management of the Company
        and audited by us.
(b) We did not audit the financial statements / financial
    information of ______subsidiaries and _________ jointly
    controlled entities/ joint operations57, whose financial
    statements/ financial information reflect total assets of Rs.
    _____ and net assets of Rs. _____ as at 31st March, 20XX,
    total revenues of Rs. ___and net cash outflows/(inflows)58
    amounting to Rs. _____for the year ended on that date, as
    considered in the consolidated financial statements. The
    consolidated financial statements also include the Group's
    share of net profit/loss of Rs.____ for the year ended 31st
    March, 20XX, as considered in the consolidated financial
    statements, in respect of ____ associates and joint ventures,
    whose financial statements / financial information have not

57
     As the case may be as per the relevant accounting standards.
58
     Pleases delete what is not applicable in the given case.



                                        41
GN on Audit of Consolidated Financial Statements (Revised 2016)


     been audited by us. These financial statements / financial
     information are unaudited and have been furnished to us by
     the Management and our opinion on the consolidated
     financial statements, in so far as it relates to the amounts
     and disclosures included in respect of these subsidiaries,
     jointly controlled entities /joint ventures and joint operations59
     and associates, and our report in terms of sub-section (3) of
     Section 143 of the Act in so far as it relates to the aforesaid
     subsidiaries, jointly controlled entities /joint ventures and
     joint operations 60 and associates, is based solely on such
     unaudited financial statements / financial information. In our
     opinion and according to the information and explanations
     given to us by the Management, these financial
     statements/ financial information are not material to the
     Group.
     Our opinion above on the consolidated financial statements,
     and our report on Other Legal and Regulatory
     Requirements below, is not modified in respect of the above
     matters with respect to our reliance on the work done and
     the reports of the other auditors and the financial
     statements/    financial  information    certified by the
     Management.




Report on Other Legal and Regulatory Requirements
As required by Section 143(3) of the Act, based on our audit and
on the consideration of report of the other auditors on separate
financial statements and the other financial information of
subsidiaries, associates and jointly controlled entities/joint
ventures and joint operations61, as noted in the `other matter'
paragraph, we report, to the extent applicable, that:
(a) We have sought and obtained all the information and
    explanations which to the best of our knowledge and belief

59
   As the case may be as per the relevant accounting standards.
60
   As the case may be as per the relevant accounting standards.
61
   As the case may be as per the relevant accounting standards.



                                      42
             GN on Audit of Consolidated Financial Statements (Revised 2016)


        were necessary for the purposes of our audit of the
        aforesaid consolidated financial statements.
(b) In our opinion, proper books of account as required by law
    relating to preparation of the aforesaid consolidated financial
    statements have been kept so far as it appears from our
    examination of those books and the reports of the other
    auditors.
(c) The Consolidated Balance Sheet, the Consolidated
    Statement of Profit and Loss, the Consolidated Cash Flow
    Statement and Consolidated Statement of Changes in
    Equity62 dealt with by this Report are in agreement with the
    relevant books of account maintained for the purpose of
    preparation of the consolidated financial statements.
(d) In our opinion, the aforesaid consolidated financial
    statements comply with the Accounting Standards specified
    under Section 133 of the Act, read with Rule 7 of the
    Companies (Accounts) Rules, 2014 /Indian Accounting
    Standards specified under Section 133 of the Act63.
(e) On the basis of the written representations received from the
    directors of the Holding Company as on 31st March, 20XX
    taken on record by the Board of Directors of the Holding
    Company and the reports of the statutory auditors of its
    subsidiary companies, associate companies and jointly
    controlled entities/ joint ventures and joint operations64
    incorporated in India, none of the directors of the Group
    companies, its associate companies and jointly controlled
    companies/joint venture incorporated in India is disqualified
    as on 31st March 20XX from being appointed as a director in
    terms of Section 164(2) of the Act.




62
     if applicable.
63
     Select as applicable.
64
     As the case may be as per the relevant accounting standards.



                                        43
GN on Audit of Consolidated Financial Statements (Revised 2016)


     (f) With respect to the adequacy of the internal financial controls
         over financial reporting of the Holding Company, its
         subsidiary companies, associate companies and jointly
         controlled entities/ joint ventures and joint operations65
         incorporated in India and the operating effectiveness of such
         controls, refer to our separate Report in "Annexure A".
(g) With respect to the other matters to be included in the
    Auditor's Report in accordance with Rule 11 of the
    Companies (Audit and Auditor's) Rules, 2014, in our opinion
    and to the best of our information and according to the
    explanations given to us and based on the consideration of
    the report of the other auditors on separate financial
    statements as also the other financial information of the
    subsidiaries, associates and jointly controlled entities/joint
    ventures and joint operations66, as noted in the `Other matter'
    paragraph:
        i.    The consolidated financial statements disclose the
              impact of pending litigations on the consolidated
              financial position of the Group, its associates and jointly
              controlled entities /joint ventures and joint operations67.
              Refer Note XX to the consolidated financial statements.
              Or
              There were no pending litigations as at 31st March 20XX
              which would impact the consolidated financial position
              of the Group, its associates and jointly controlled entities
              /joint ventures and joint operations68.
        ii.   Provision has been made in the consolidated financial
              statements, as required under the applicable law or
              accounting standards, for material foreseeable losses, if
              any, on long-term contracts including          derivative

65
   As the case may be as per the relevant accounting standards.
66
   As the case may be as per the relevant accounting standards.
67
   As the case may be as per the relevant accounting standards.
68
   As the case may be as per the relevant accounting standards.



                                      44
               GN on Audit of Consolidated Financial Statements (Revised 2016)


               contracts - Refer (a) Note XX to the consolidated
               financial statements in respect of such items as it
               relates to the Group, its associates and jointly controlled
               entities /joint ventures and joint operations69 and (b) the
               Group's share of net profit/loss in respect of its
               associates.
               Or
               The Group, its associates and jointly controlled entities
               /joint ventures and joint operations70 did not have any
               material foreseeable losses on long-term contracts
               including derivative contracts during the year ended 31st
               March 20XX.
        iii.   There are no amounts which are required to be
               transferred to the Investor Education and Protection Fund
               by the Holding Company and its subsidiary companies,
               associate companies and jointly controlled entities/ joint
               ventures and joint operations71 incorporated in India
               during the year ended 31st March 20XX.
               Or

               There has been no delay in transferring amounts to the
               Investor Education and Protection Fund by the Holding
               Company and its subsidiary companies, associate
               companies and jointly controlled entities/ joint ventures
               and joint operations72 incorporated in India during the
               year ended 31st March 20XX.
               Or
               The following are the instances of delay in transferring
               amounts, to the Investor Education and Protection Fund

69
     As the case may be as per the relevant accounting standards.
70
     As the case may be as per the relevant accounting standards.
71
     As the case may be as per the relevant accounting standards.
72
     As the case may be as per the relevant accounting standards.



                                        45
GN on Audit of Consolidated Financial Statements (Revised 2016)


             by the Holding Company and its subsidiary companies,
             associate companies and jointly controlled companies
             incorporated in India during the year ended 31st March
             20XX: [describe the delays, covering date of payment,
             amount involved and number of days' delay.]


                                                          For XYZ & Co.
                                                  Chartered Accountants
                                                 (Firm's Registration No.)


                                                           Signature
                        (Name of the Member Signing the Audit Report)
                                                       (Designation73)
                                            (Membership No. XXXXX)
Place of Signature:
Date:




73
     Partner or Proprietor as the case may be.



                                         46
         GN on Audit of Consolidated Financial Statements (Revised 2016)


                Illustration 3: Modified Opinion

 Note:
 The following illustrative format is based on the assumptions
 that the Group has:
    Certain components which have been audited by
    auditor/s other than the Principal Auditor and such
    component/s is/ are material to the consolidated
    financial statements of the Group. The auditors of such
    components which are Indian companies, and they
    have issued a modified opinion and also reported under
    section 143(3)(f) and 143(3)(h) of the Companies Act,
    2013.
    Certain components which are unaudited and such
    component/s is/ are not material to the consolidated
    financial statements of the Group.
 The independent          auditor    of   Consolidated     Financial
 Statements:
    Gives a Modified Opinion on the consolidated financial
    statements.
    Discloses the aforementioned facts about                     the
    Components in the "Other Matters" Paragraph                    in
    accordance with the Announcement issued by                   the
    Auditing and Assurance Standards Board under                 the
    authority of the Council of ICAI in February 2014.



ILLUSTRATIVE FORMAT OF INDEPENDENT AUDITOR'S
REPORT ON       THE   CONSOLIDATED FINANCIAL
STATEMENTS OF A GROUP UNDER THE COMPANIES
ACT, 2013 AND THE RULES THEREUNDER
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF ABC COMPANY LIMITED


                                    47
GN on Audit of Consolidated Financial Statements (Revised 2016)


Report on the Consolidated Financial Statements
We have audited the accompanying consolidated Ind AS 74
financial statements of ABC Company Limited (hereinafter
referred to as "the Holding Company") and its subsidiaries (the
Holding Company and its subsidiaries together referred to as
"the Group") its associates and its jointly controlled entities/joint
ventures and joint operations75, comprising the Consolidated
Balance Sheet as at 31st March, 20XX, the Consolidated
Statement of Profit and Loss (including other comprehensive
income)76, the Consolidated Cash Flow Statement, Consolidated
Statement of Changes in Equity77, for the year then ended, and a
summary of the significant accounting policies and other
explanatory information (hereinafter referred to as "the
consolidated financial statements").
Management's Responsibility                   for    the     Consolidated
Financial Statements
The Holding Company's Board of Directors is responsible for
the preparation of these consolidated financial statements in
terms of the requirements of the Companies Act, 2013 (hereinafter
referred to as "the Act") that give a true and fair view of the
consolidated     financial   position,  consolidated    financial
performance     (including other comprehensive income)78,
consolidated cash flows and consolidated statement of changes
in equity79 of the Group including its Associates and Jointly
controlled entities /Joint ventures and Joint operations80 in
accordance with the accounting principles generally accepted in
India, including the Accounting Standards specified under
Section 133 of the Act, read with Rule 7 of the Companies

74
   if applicable.
75
   As the case may be as per the relevant accounting standards.
76
   if applicable.
77
   if applicable.
78
   if applicable.
79
   if applicable.
80
   As the case may be as per the relevant accounting standards.



                                      48
          GN on Audit of Consolidated Financial Statements (Revised 2016)


(Accounts) Rules, 2014 / Indian Accounting Standards prescribed
under Section 133 of the Act81. The respective Board of Directors
of the companies included in the Group and of its associates
and jointly controlled entities /joint ventures and joint operations82
are responsible for maintenance of adequate accounting records
in accordance with the provisions of the Act for safeguarding the
assets of the Group and i t s a s s o ci a t es and its jointly
controlled entities/joint ventures and joint operations83 and for
preventing and detecting frauds and other irregularities; the
selection and application of appropriate accounting policies;
making judgments and estimates that are reasonable and
prudent; and the design, implementation and maintenance of
adequate internal financial controls, that were operating effectively
for ensuring the accuracy and completeness of the accounting
records, relevant to the preparation and presentation of the
financial statements that give a true and fair view and are
free from material misstatement, whether due to fraud or error,
which have been used for the purpose of preparation of the
consolidated financial statements by the Directors of the Holding
Company, as aforesaid.
Auditor's Responsibility
Our responsibility is to express an opinion on these
consolidated financial statements based on our audit. While
conducting the audit, we have taken into account the provisions of
the Act, the accounting and auditing standards and matters
which are required to be included in the audit report under the
provisions of the Act and the Rules made thereunder.
We conducted our audit in accordance with the Standards on
Auditing specified under Section 143(10) of the Act. Those
Standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from
material misstatement.

81
   Select as applicable.
82
   As the case may be as per the relevant accounting standards.
83
   As the case may be as per the relevant accounting standards.



                                      49
GN on Audit of Consolidated Financial Statements (Revised 2016)


An audit involves performing procedures to obtain audit
evidence about the amounts and the disclosures in the
consolidated financial statements. The procedures selected
depend on the auditor's judgment, including the assessment of
the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal financial control
relevant to the Holding Company's preparation of the
consolidated financial statements that give a true and fair view in
order to design audit procedures that are appropriate in the
circumstances. An audit also includes evaluating the
appropriateness of the accounting policies used and the
reasonableness of the accounting estimates made by the Holding
Company's Board of Directors, as well as evaluating the overall
presentation of the consolidated financial statements.
We believe that the audit evidence obtained by us and the audit
evidence obtained by the other auditors in terms of their reports
referred to in sub-paragraph (a) of the Other Matters paragraph
below, is sufficient and appropriate to provide a basis for our
qualified audit opinion on the consolidated financial statements.
Basis for Qualified Opinion
We draw your attention to the following qualification to the audit
opinion of the financial statements of [Name of the subsidiary
company], a subsidiary of the Holding Company issued by an
independent firm of Chartered Accountants vide its Report dated
[date] reproduced by us as under:
"[State the Basis for Qualified Opinion as included by the
component auditor in his report]"
Qualified Opinion
In our opinion and to the best of our information and according
to the explanations given to us and based on the consideration of
reports of other auditors on separate financial statements and on
the other financial information of the subsidiaries, associates and



                                  50
          GN on Audit of Consolidated Financial Statements (Revised 2016)


jointly controlled entities/joint ventures and joint operations84, the
aforesaid consolidated financial statements give the information
required by the Act in the manner so required and except for the
effects of the matter referred to in the Basis for Qualified Opinion
paragraph above, give a true and fair view in conformity with the
accounting principles generally accepted in India, of the
consolidated state of affairs (financial position) of the Group, its
associates and jointly controlled entities /joint ventures and joint
operations85 as at 31st March, 20XX, and their consolidated
profit/loss (financial performance including other comprehensive
income)86, their consolidated cash flows and consolidated
statement of changes in equity87 for the year ended on that date.
Other Matters
(a) We did not audit the financial statements / financial
    information of _______subsidiaries, and ______jointly
    controlled entities /joint operations88, whose financial
    statements/ financial information reflect total assets of
    Rs._____ and net assets of Rs. _____ as at 31st March,
    20XX, total revenues of Rs. ___ and net cash
    outflows/(inflows)89 amounting to Rs. _____for the year
    ended on that date, as considered in the consolidated
    financial statements. The consolidated financial statements
    also include the Group's share of net profit/loss of Rs. ___for
    the year ended 31st March, 20XX, as considered in the
    consolidated financial statements, in respect of____
    associates and joint ventures, whose financial statements /
    financial information have not been audited by us. These
    financial statements / financial information have been audited
    by other auditors whose reports have been furnished to us by


84
   As the case may be as per the relevant accounting standards.
85
   As the case may be as per the relevant accounting standards.
86
   if applicable.
87
   if applicable.
88
   As the case may be as per the relevant accounting standards.
89
   Please delete what is not applicable in the given case.



                                      51
GN on Audit of Consolidated Financial Statements (Revised 2016)


     the Management and our opinion on the consolidated
     financial statements, in so far as it relates to the amounts
     and disclosures included in respect of these subsidiaries,
     jointly controlled entities /joint ventures and joint
     operations 90 and associates, and our report in terms of sub-
     section (3) of Section 143 of the Act, insofar as it relates to
     the aforesaid subsidiaries, jointly controlled entities /joint
     ventures and joint operations91 and associates, is based
     solely on the reports of the other auditors.
     Certain of these subsidiaries/associates/ joint ventures and
     joint operations are located outside India whose financial
     statements and other financial information have been
     prepared in accordance with accounting principles generally
     accepted in their respective countries and which have been
     audited by other auditors under generally accepted auditing
     standards applicable in their respective countries. The
     Company's management has converted the financial
     statements of such subsidiaries/associates/ joint ventures and
     joint operations located outside India from accounting
     principles generally accepted in their respective countries to
     accounting principles generally accepted in India. We have
     audited these conversion adjustments made by the
     Company's management. Our opinion in so far as it relates to
     the balances and affairs of such subsidiaries/associates/ joint
     ventures and joint operations located outside India is based
     on the report of other auditors and the conversion
     adjustments prepared by the management of the Company
     and audited by us.
(b) We did not audit the financial statements / financial
    information of subsidiaries and jointly controlled entities/ joint
    operations92, whose financial statements/financial information
    reflect total assets of Rs. _____ and net assets of Rs. _____

90
   As the case may be as per the relevant accounting standards.
91
   As the case may be as per the relevant accounting standards.
92
   As the case may be as per the relevant accounting standards.



                                      52
          GN on Audit of Consolidated Financial Statements (Revised 2016)


     as at 31st March, 20XX, total revenues of Rs. ___and net
     cash outflows/(inflows)93 amounting to Rs. _____for the year
     ended on that date, as considered in the consolidated
     financial statements. The consolidated financial statements
     also include the Group's share of net profit/loss of Rs.____
     for the year ended 31st March, 20XX, as considered in the
     consolidated financial statements, in respect of____
     associates and joint ventures, whose financial statements /
     financial information have not been audited by us. These
     financial statements / financial information are unaudited and
     have been furnished to us by the Management and our
     opinion on the consolidated financial statements, in so far
     as it relates to the amounts and disclosures included in
     respect of these subsidiaries, jointly controlled entities /joint
     ventures and joint operations94 and associates, and our report
     in terms of sub-section (3) of Section 143 of the Act in so far
     as it relates to the aforesaid subsidiaries, jointly controlled
     entities /joint ventures and joint operations95 and associates,
     is based solely on such unaudited financial statements/
     financial information. In our opinion and according to the
     information and explanations given to us by the
     Management,        these   financial   statements/      financial
     information are not material to the Group.
     Our opinion above on the consolidated financial statements,
     and our report on Other Legal and Regulatory
     Requirements below, is not modified in respect of the above
     matters with respect to our reliance on the work done and
     the reports of the other auditors and the financial
     statements/    financial  information    certified by the
     Management.

Report on Other Legal and Regulatory Requirements
As required by Section 143(3) of the Act, based on our audit and

93
   Pleases delete what is not applicable in the given case.
94
   As the case may be as per the relevant accounting standards.
95
   As the case may be as per the relevant accounting standards.



                                      53
GN on Audit of Consolidated Financial Statements (Revised 2016)


on the consideration of report of the other auditors on separate
financial statements and the other financial information of
subsidiaries, associates and jointly controlled entities/joint
ventures and joint operations96, as noted in the `other matter'
paragraph, we report, to the extent applicable, that:
(a) We have sought and obtained all the information and
    explanations which to the best of our knowledge and belief
    were necessary for the purposes of our audit of the
    aforesaid consolidated financial statements.
(b) In our opinion, proper books of account as required by law
    relating to preparation of the aforesaid consolidated financial
    statements have been kept so far as it appears from our
    examination of those books and the reports of the other
    auditors, except as stated in the auditor's report dated [date]
    on the financial statements of [Name of the component], a
    subsidiary of the Holding Company, issued by an independent
    firm of Chartered Accountants which is reproduced as below:
     "[State the remark as included by the component auditor in his
     report].
(c) The Consolidated Balance Sheet, the Consolidated
    Statement of Profit and Loss, the Consolidated Cash Flow
    Statement and Consolidated Statement of Changes in
    Equity97 dealt with by this Report are in agreement with the
    relevant books of account maintained for the purpose of
    preparation of the consolidated financial statements.
(d) In our opinion, the aforesaid consolidated financial
    statements comply with the Accounting Standards specified
    under Section 133 of the Act, read with Rule 7 of the
    Companies (Accounts) Rules, 2014 /Indian Accounting
    Standards specified under Section 133 of the Act98.


96
   As the case may be as per the relevant accounting standards.
97
   if applicable.
98
   Select as applicable.



                                      54
             GN on Audit of Consolidated Financial Statements (Revised 2016)


(e) The audit report on the financial statements of [Name of the
    subsidiary], a subsidiary of the Holding Company, issued by
    an independent firm of Chartered Accountants vide its audit
    report dated [date] contains the following remark, which is
    reproduced by us as below:
        "The matter described in the Basis for Qualified Opinion
        paragraph above, in our opinion, may have an adverse effect
        on the functioning of the Group."
(f) On the basis of the written representations received from the
    directors of the Holding Company as on 31st March, 20XX
    taken on record by the Board of Directors of the Holding
    Company and the reports of the statutory auditors of its
    subsidiary companies, associate companies and jointly
    controlled entities/ joint ventures and joint operations99
    incorporated in India, none of the directors of the Group
    companies, its associate companies and jointly controlled
    companies/joint venture incorporated in India is disqualified
    as on 31st March 20XX from being appointed as a director in
    terms of Section 164(2) of the Act.
(g) The audit report on the financial statements of [Name of the
    subsidiary], a subsidiary of the Holding Company, issued by
    an independent firm of Chartered Accountants vide its audit
    report dated [date] contains the following remark, which is
    reproduced by us as below:
        "The qualification relating to maintenance of accounts and
        other matters connected therewith are as stated in the Basis
        for Qualified Opinion paragraph above."
 (h) With respect to the adequacy of the            internal financial controls
     over financial reporting of the                 Holding Company, its
     subsidiary companies, associate                 companies and jointly
     controlled entities/ joint ventures             and joint operations100


99
     As the case may be as per the relevant accounting standards.
100
      As the case may be as per the relevant accounting standards.



                                        55
GN on Audit of Consolidated Financial Statements (Revised 2016)


      incorporated in India and the operating effectiveness of such
      controls, refer to our separate Report in "Annexure A".
(i)   With respect to the other matters to be included in the
      Auditor's Report in accordance with Rule 11 of the
      Companies (Audit and Auditor's) Rules, 2014, in our opinion
      and to the best of our information and according to the
      explanations given to us and based on the consideration of
      the report of the other auditors on separate financial
      statements as also the other financial information of the
      subsidiaries, associates and jointly controlled entities/joint
      ventures and joint operations101, as noted in the `Other matter'
      paragraph:
      i.    The consolidated financial statements disclose the
            impact of pending litigations on the consolidated
            financial position of the Group, its associates and jointly
            controlled entities /joint ventures and joint operations102.
            Refer Note XX to the consolidated financial statements.
            Or
            There were no pending litigations as at 31st March 20XX
            which would impact the consolidated financial position
            of the Group, its associates and jointly controlled entities
            /joint ventures and joint operations103
      ii.   Provision has been made in the consolidated financial
            statements, as required under the applicable law or
            accounting standards, for material foreseeable losses, if
            any, on long-term contracts including              derivative
            contracts - Refer (a) Note XX to the consolidated
            financial statements in respect of such items as it
            relates to the Group, its associates and jointly controlled
            entities /joint ventures and joint operations104 and (b) the

101
    As the case may be as per the relevant accounting standards.
102
    As the case may be as per the relevant accounting standards.
103
    As the case may be as per the relevant accounting standards.
104
    As the case may be as per the relevant accounting standards.



                                      56
             GN on Audit of Consolidated Financial Statements (Revised 2016)


             Group's share of net profit/loss in respect of its
             associates.
             Or
             The Group, its associates and jointly controlled entities
             /joint ventures and joint operations105 did not have any
             material foreseeable losses on long-term contracts
             including derivative contracts during the year ended 31st
             March 20XX.
      iii.   There are no amounts which are required to be
             transferred to the Investor Education and Protection Fund
             by the Holding Company and its subsidiary companies,
             associate companies and jointly controlled entities/ joint
             ventures and joint operations106 incorporated in India
             during the year ended 31st March 20XX.
             Or

             There has been no delay in transferring amounts to the
             Investor Education and Protection Fund by the Holding
             Company and its subsidiary companies, associate
             companies and jointly controlled entities/ joint ventures
             and joint operations107 incorporated in India during the
             year ended 31st March 20XX.
             Or
             The following are the instances of delay in transferring
             amounts, to the Investor Education and Protection Fund
             by the Holding Company and its subsidiary companies,
             associate companies and jointly controlled companies
             incorporated in India during the year ended 31st March
             20XX: [describe the delays, covering date of payment,
             amount involved and number of days' delay.]

105
    As the case may be as per the relevant accounting standards.
106
    As the case may be as per the relevant accounting standards.
107
    As the case may be as per the relevant accounting standards.



                                      57
GN on Audit of Consolidated Financial Statements (Revised 2016)




                                                           For XYZ & Co.
                                                   Chartered Accountants
                                                  (Firm's Registration No.)


                                                     Signature
                  (Name of the Member Signing the Audit Report)
                                                (Designation108)
                                      (Membership No. XXXXX)
Place of Signature:
Date:




108
      Partner or Proprietor as the case may be.



                                         58
                                                 Appendix II
Definitions of Terms used in the Guidance Note
(This Appendix form part of the Guidance Note. The purpose of
this Appendix is to define the terms which have been used in
this Guidance Note)
Terms defined under Accounting Standards
1.   Associate: An associate is an enterprise in which the
     investor has significant influence and which is neither a
     subsidiary nor a joint venture of the investor.
2.   Consolidated      financial     statements:    Consolidated
     financial statements are the financial statements of a group
     presented as those of a single enterprise.
3.   Control:
     a. The ownership, directly or indirectly through
        subsidiary(ies), of more than one-half of the voting
        power of an enterprise; or
     b. control of the composition of the board of directors in
        the case of a company or of the composition of the
        corresponding governing body in case of any other
        enterprise so as to obtain economic benefits from its
        activities.
4.   Group: A group comprises a parent and its subsidiaries.
5.   Joint control: Joint control is the contractually agreed
     sharing of control over an economic activity.
6.   Joint venture: A joint venture is a contractual arrangement
     whereby two or more parties undertake an economic activity,
     which is subject to joint control.
7.   Minority interest: Minority interest is that part of the net
     results of operations and of net assets of a subsidiary
     attributable to interests which are not owned, directly or
     indirectly, through subsidiary(ies), by the parent.
GN on Audit of Consolidated Financial Statements (Revised 2016)


8.   Parent: A parent is an enterprise that has one or more
     subsidiaries.
9.   Significant influence: Significant influence is the power to
     participate in the financial and/ or operating policy decisions
     of the investee but not control over those policies.
10. Subsidiary: A subsidiary is an enterprise that is controlled
    by another enterprise (known as the parent).
Terms defined under Ind AS
1.   Associate: An associate is an entity over which the investor
     has significant influence.
2.   Control of an investee: An investor controls an investee
     when the investor is exposed, or has rights, to variable
     returns from its involvement with the investee and has the
     ability to affect those returns through its power over the
     investee.
3.   Consolidated financial statements: The financial
     statements of a group in which the assets, liabilities, equity,
     income, expenses and cash flows of the parent and its
     subsidiaries are presented as those of a single economic
     entity.
4.   Group: A parent and its subsidiaries.
5.   Joint Control: Joint control is the contractually agreed
     sharing of control of an arrangement, which exists only when
     decisions about the relevant activities require the unanimous
     consent of the parties sharing control.
6.   Joint Venture: A joint venture is a joint arrangement whereby
     the parties that have joint control of the arrangement have
     rights to the net assets of the arrangement.
7.   Non-controlling Interest: Equity in a subsidiary not
     attributable, directly or indirectly, to a parent.
8.   Parent: An entity that controls one or more entities.


                                  60
         GN on Audit of Consolidated Financial Statements (Revised 2016)


9.   Power: Existing rights that give the current ability to direct the
     relevant activities.
10. Relevant Activities: Relevant activities are activities of the
    investee that significantly affect the investee's returns.
11. Significant influence: Significant influence is the power to
    participate in the financial and operating policy decisions of
    the investee but is not control or joint control of those policies.
12. Subsidiary: An entity that is controlled by another entity.
13. Separate Financial Statements: separate financial
    statements are those presented by a parent (i.e. an investor
    with control of a subsidiary) or an investor with joint control of,
    or significant influence over, an investee, in which the
    investments are accounted for at cost or in accordance with
    Ind AS 109, `Financial Instruments'.
Terms defined under SA 600, "Using the Work of
Another Auditor"
1.   Component: It is a division, branch, subsidiary, joint venture,
     associated enterprises or other entity whose financial
     information is included in the financial information audited by
     principal auditor.




                                  61

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
SEO Company Search Engine Optimization Company US SEO Local SEO Company Website SEO Company Alabama SEO Company Alaska SEO Company Arizona SEO Company Arkansas SEO Company California SEO Company Colorado SEO Company Connecticut SEO Company Delawa

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions