ISA 710 - Comparative Information, Corresponding Figures and Comparative Financial Statements

Question 1

ISA 710: Comparative Information - Corresponding Figures and Comparative Financial Statements:

Answer 1

Comparative Information is those amounts or Disclosures which are included in the part of Current Period FS because those are required to be shown by FRF.

Reporting Responsibility of the Auditor w.r.t Comparative Information which is presented in the FS.
> Auditor needs to obtain SAAE relating to a fact that the FS on whether they include the Comparative Information which is required by FRF.
> Check Comparative Information matches with prior period’s amounts and disclosures.
> Should check The consistency of Accounting Policies, if there is any change then check whether there is any adequate disclosure.

While checking the correctness of Comparative Information, if the Auditor came across anything which is an indication of Material Misstatement w.r.t Comparative Information, then the Auditor needs to apply some additional procedures, in order to understand what the Misstatement is all about.

Reporting with respect to Comparative Information:
1. In the form of Comparative Figures:
> These are previous year Figures which are integral part of FS.
>Auditor Reporting should be based on current year in case of corresponding figures:
a) If previous year Audit Report is Qualified, Adverse or Disclaimer of Opinion, that problem of Misstatement is unresolved till today.
Example: Creation of provision not made by the management till date even if previous Auditor’s Report is Modified.
> If that Misstatement not affecting the current period FS but it affects the Comparability.
b) Suppose the previous year Audit Report is unmodified, but the current year Auditor got the Evidence about the Misstatement in previous year.
> If previous Audit was done by another Auditor, the Auditor now can introduce OM - Other Matter Paragraph.
* Previous Year FS audited by another Auditor.
* Type of Opinion with reason.
* Date of Audit Report.
* If the previous year FS unaudited disclose the same, in the OM paragraph that in the previous year, FS were not audited.
» Always remember that, as per ISA 501, Auditor needs to obtain SAAE regarding opening balances despite the above.
2. In the form of Comparative Financial Statements:
This is normally practiced when issuing Special Purpose Financial Statements where an Entity can be asked to submit FS say for 3 or 5 Years.

Reporting Responsibility with respect to Comparative FS:
> The management gives two or more sets of Financial Statements instead of giving additional column in the one Financial Statement.
> The Auditor needs to give his Opinion regarding all sets of Financial Statements.

Sometimes there is a possibility that:
Previous Year - Unmodified
Current Year - Modified on PY FS.
Report - OM - Other Matter Paragraph.

Where Previous Year FS audited by another Auditor, now in the current year the Auditor come across a Material Misstatement in the previous year FS, then the Auditor needs to communicate with the Management and TCWG and request them to communicate the same with predecessor Auditor.

It is also possible that The previous year FS are unaudited, disclose that on OM - Other Matter paragraph.

Comparative Information is more common with Special Purpose Financial Statements.
Example: Bank requires 3 years Financial Statements.

In case of mismatch, this needs to be reported by the Auditor through OM - Other Matter Paragraph.

This Standard, ISA 710 helps to compare the Data.

With this, we have successfully covered ISA 710 - Comparative Information, Corresponding figures and Comparative Financial Statements.

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