StudentStudent asked 2 years ago

PM Pg 1.24 – Qs 5 – Solution Last para ” In all circumstances, if the other auditor issues, or intends to issue, a modified auditor’s report,the principal auditor should consider whether the subject of the modification is of such nature and significance, in relation to the financial information of the entity on which the principal auditor is reporting that it requires a modification of the principal auditor’s report.”
contradicts with
PM Pg 10.7 Qs 8 – Solution Last para “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
Kindly guide me what is correct

2 Answers
RaviRavi Staff answered 2 years ago

Hello Priyesh
in first question sa 600 is the base which deals with branch auditors / subsidiary auditors / associate auditors etc and it says take into consideration nature and significance also. so as per this if matter of modification of subsidiary’s audit report is not significant / material we should not modify principal audit report
now second question is based on revised guidance note on consolidation (2016) as per that principal auditor will have to include details of modification in his audit report irrespective of  materiality this stand is taken by guidance notes
now this is contradiction between 2 things SA 600 and Guidance Note on Consolidation
ICAI on 25th May 2017 amended guidance note on consolidation and said SA 600 should be followed, so SA 600 would prevail. So in exam you should specify story in short. explaining both the things 

RaviRavi Staff answered 2 years ago

module and pm are not yet amended for the same announcement which is 3 months old and pm was issued in Jan 17 much before this change

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