Audit Of Consolidated Financial Statements

Question 1

Conditions in INDAS where Preparation of CFS not mandatory

Answer 1

Following conditions are satisfied then-
It is a wholly Owned or partially owned subsidiary of another company and all its other members including those not otherwise entitled to vote having BIENG intimated in writing for which proof of delivery of such intimation is available and they do not object company for not preparing CFS
It is a company whose security are not listed and not in the process of listing on any stock exchange
It’s ultimate or intermediate parent files CFS with registrar not accordance with the applicable INDAS

An investment entity shall not consolidate its subsidiaries
However parent of investment entity shall consolidate all its subsidiaries including the one controlled through such investment subsidiary unless such parent is also a investment company

Question 2

Conditions in AS where Preparation of CFS not mandatory

Answer 2

Controls is intended to be temporary coz acquired for subsequent disposal purpose
It operates under severe long term restrictions which significantly impair its ability to transfer funds to parent

Question 3

Responsibility of parent in consolidation

Answer 3

Identifying components, including the financial information of component to be included in CFS
Identify reportable segments for segmental reporting if applicable
Identify related pArties and related party transactions for reporting
Obtain accurate and complete financial information from components
Making appropriate consolidation adjustment
Harmonization of accounting policies and accounting framework
GAAP conversion where applicable

Question 4

Responsibility of auditor in audit of CFS

Answer 4

Accordance with AFRF
Enable himself to express an opinion on the true and fair view
Enquiries about the matters to be reported in 143(1)
To report matter given in 143(3)
Validate requirement of CFS as per AFRF

Question 5

Auditors procedures in auditing the consolidated FS

Answer 5

Obtain the list of components
Review the information provided by the management
Verify that all the subsidiaries are being included by following the below procedures

Review of his previous year working papers
Review parents procedures for identification of component
Review the investments
Review who joint venture agreement
Statutory records maintained ( 186)

Changes in shareholding
Consolidation adjustment are BIENG made and being properly authorized and in accordance with applicable AFRF

Question 6

What to check to verify whether the BOd controls the other entity composition of board

Answer 6

Boards minutes
Shareholder agreement
Agreement with the entities to which parent might have provided technical know how
Enforcement of statute

Question 7

Types of current period consolidation adjustments

Answer 7

Intra group transactions
Intra group unrealized gains
Intra group indebtness
Harmonizing different accounting policies
Subsequent event between balance sheet date and CFS audit report
Effect of significant transactions or other events occur between date of components of balance sheet and CFS financial statement date when date of component financial stament is not same as parents date of financial statement
Conversion from foreign gaap to Indian gaap
Movements in NCI after DOA
Deferred tax adjustment

Question 8

Verification points in current period consolidation adjustment

Answer 8

Intra group transactions
Uniform accounting policies
Different accounting policies as not practicable 
Harmonizing of accounting. Policies
NCI
Deferred tax

Question 9

Verification points for permanent consolidation adjustments

Answer 9

Adj for goodwill/CR is appropriate
Attention to pre acquisition reserve
Proper allocation of the above reserve between NCI and parent
Subsequent changes in the value of GW/CR or NCI
If goodwill and capital reserve are shown as net off when allowed by AFRF then separate figures should be shown in notes to accounts