John Selwood's Audit Clinic
John tackles some topical questions on smaller entity audit documentation and on audit reports for academy schools and groups
When auditing group accounts, my standard group audit report expresses an opinion on the company’s income statement, as well as that of the consolidated income statements. Is this correct?
Group audit reports can present problems. I have seen audit reports on group financial statements that did not mention the consolidated financial statements at all. As ever, be careful when using example audit reports. Remember that some groups present their consolidated financial statements separately from the company’s own financial statements. Also, not everyone uses the exemption available under s408 to not present the company’s own income statement. When using example audit reports, make sure that you use the right example. I have heard the argument put forward by auditors that even when the s408 exemption is used, the auditor is still required to report on the company’s own income statement. After all, they did have to audit it when auditing the consolidated accounts. This logic doesn’t work. Auditors express an opinion on the financial statements. So, if it is not in there, do not express an opinion on it. I always use the ICAEW helpsheets to check audit reports, including:
- Preparing an audit report for a group – combined audit report for the group and parent company; and
- Preparing an audit report for a group – separate audit reports for the group and parent company
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