While auditing consolidated financial statements of Kissan Industries Limited for the year 2024-25, a manufacturing company whose financial…
CA Final · Advanced Auditing, Assurance and Professional Ethics · MTP · September 2025
While auditing consolidated financial statements of Kissan Industries Limited for the year 2024-25, a manufacturing company whose financial statements are required to be prepared in accordance with Division II of Schedule III of the Companies Act, 2013, CA Kartik notices that: (A) The notes to accounts in respect of consolidated financial statements disclose additional information pertaining to the holding company and its subsidiaries. It provides disclosure regarding percentages of consolidated net assets; consolidated profit and loss; and total comprehensive income along with their respective amounts pertaining to holding company and its subsidiaries. (B) The financial statements of one foreign subsidiary included in consolidated financial statements are drawn up to 31st December, 2024 in accordance with legal requirements in US. He feels it to be weird and is of the view that consolidated financial statements of group could present a distorted picture. The management, in turn, informs him that it is not practicable to draw the financial statements of foreign subsidiary to 31st March, 2025. (C) During the year 2024-25, goodwill of 60 crore had arisen on account of the acquisition of a subsidiary during the year and there is no impairment loss as on the balance sheet date. Besides, adjustments have been made in consolidated financial statements with respect to intra-group indebtedness and those related to harmonizing different accounting policies being adopted by parent and its subsidiaries. (D) It is noticed by him that one subsidiary was acquired on 21.06.24. He is in a dilemma as regards to the correctness of consolidation of its financial statements in group financial statements. Besides, he is also in the process of finalising audit report including matters to be reported under CARO, 2020 in respect of consolidated financial statements. However, he is in a fix in respect of manner of reporting under CARO, 2020 relating to consolidated financial statements. Based on the above facts, answer the following:
Suggested Answer and Working Notes:
Correct Answer: Option (A)
The said disclosure is not proper as percentage of other comprehensive income along with respective amount pertaining to holding company and its subsidiaries is also required.
Topics: Professional Ethics & Liabilities of Auditors, Standard on Auditing (SA), Reporting
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