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Information regarding Audited/Unaudited Components - Manner of Disclosure in Principal Auditor's Report.
February, 13th 2014
                                          ANNOUNCEMENT 1
   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)
1.       An independent auditor of the financial statements of an entity may, at times, need to rely upon work of
the other auditors. For example, in an audit of the stand alone financial statements of an entity the independent
auditor thereof (the Principal Auditor) may need to rely upon the financial statements of the entity's component/s
such as branch/es, division/s, etc., which have been audited by other independent auditor/s. Similarly, in an audit
of the consolidated financial statements of a group, the independent auditor thereof (the Principal Auditor), may
need to rely upon the work of the independent auditors of the components of the group such as subsidiary/ies,
joint venture/s, associate/s, etc., whose audited financial statements/ information have been included in the
consolidated financial statements and have been audited by their respective independent auditors (the
Component Auditors).

2.       There may also be a situation where the financial statements of one or more components included in the
stand alone financial statements of an entity/ consolidated financial statements of a group have not been audited
either by the Principal Auditor or the Component Auditor/s.




3.       Members have sought guidance on the appropriate manner of disclosure of information in the
independent auditor's report of the Principal Auditor about the fact that the financial statements/ information
pertaining to certain/ all components, included in the stand alone financial statements of an entity/ consolidated
financial statements of a group are unaudited.
                                                    th
4.       The Council at its 331st meeting held on 10 February, 2014 considered the above matter and decided as
under:

                                                                    Disclosures in the Principal Auditor's Report

Situation 1        Component/s is/ are unaudited and
                   such component/s is/ are not material
                                                                    The principal auditor may or may not
                   to the financial statements of the
                                                                    disclose the fact of such component/s in the
                   entity/     consolidated       financial
                                                                    Principal Auditor's report.     In case the
                   statements of the Group
                                                                    Principal Auditor decided to make such
                                                                    disclosure, the same would be done under
                                                                    the "Other Matters" paragraph, pursuant to
Situation 2        Component/s     is/   are   audited   by
                                                                    SA 706, Emphasis of Matter Paragraphs and
                   auditor/s other than the Principal
                                                                    Other Matter Paragraphs in the Independent
                   Auditor and such component/s is/ are
                                                                    Auditor's Report. An illustrative manner of
                   not material to the financial statements
                                                                    reporting is given in Illustration 2 in the
                   of the entity/ consolidated financial




1
 This announcement has been issued by Auditing and Assurance Standards Board under the authority of the Council
of ICAI. (http://www.icai.org/new_post.html?post_id=662&c_id=38)

                                                                                                     Page 1 of 2
                  statements of the Group                         Appendix to SA 706.



Situation 3       Component/s     is/   are   audited   by        The principal auditor would need to disclose
                  auditor/s other than the Principal              the fact of such component/s in the Principal
                  Auditor and such component/s is/ are            Auditor's report. Such disclosure would be
                  material to the financial statements of         done under the "Other Matters" paragraph,
                  the   entity/   consolidated   financial        pursuant to SA 706, Emphasis of Matter
                  statements of the Group                         Paragraphs and Other Matter Paragraphs in
                                                                  the Independent Auditor's Report.           An
                                                                  illustrative manner of reporting is given in
                                                                  Illustration 2 in the Appendix to SA 706.



Situation 4       Component/s is/ are unaudited and               The Principal Auditor needs to consider its/
                  such component/s is/ are material to            their impact on the auditor's opinion on the
                  the financial statements of the entity/         financial   statements     of   the    entity/
                  consolidated financial statements of            consolidated financial statements of the
                  the Group                                       group, in terms of the principles laid down in
                                                                  SA 705, Modifications to the Opinion in the
                                                                  Independent Auditor's Report.



5.      Further, in case of the auditor's reports of the statutory central auditors, the manner of disclosure
about the audited/ unaudited components as given in the illustrative formats of the auditor's report in the
Guidance Note on Audit of Banks would continue to apply.




                                                                                                    Page 2 of 2

 
 
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