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The Financial Reporting Review Board (FRRB) of ICAI conducts a review of general purpose financial statements of various enterprises for compliance with generally accepted accounting principles (GAAP), compliance with the reporting obligations of the auditor and compliance with disclosure requirements prescribed by regulatory bodies, statutes and rules and regulations relevant to the enterprise. FRRB was constituted as a proactive mechanism to improve financial reporting and auditing practices.
The Board has issued a Study on Compliance with Financial Reporting Requirements that contains instances of common non-compliances or errors in Ind AS financial statements. This story will take a closer look at some of the key non-compliances and errors observed by the FRRB in relation to the reporting under the Audit Report. It will act as a reference point to check reporting compliances while finalising the audit report of various entities.
I. Relevant provisions of SA
If adequate disclosure about the material uncertainty is made in the financial statements, the auditor shall express an unmodified opinion and the auditor‘s report shall include a separate section under the heading “Material Uncertainty Related to Going Concern
Draw attention to the note in the financial statements that disclose the matters set out in paragraph 19
State that these events or conditions indicate that a material uncertainty exists that may cast significant doubt on the entity‘s ability to continue as a going concern and that the auditor‘s opinion is not modified in respect of the matter.
II. In-appropriate Reporting
We draw attention to Note XX to the standalone financial statements which more fully describe that uncertainty faced by the company in signing PPA and various factors affecting the progress of the project resulted in stoppage of work. However, management is confident that current situation is temporary and does not have any going concern issue. Our opinion is not qualified in respect of the above matters.
III. FRRB Observation
The auditor has not reported under a separate section on going concern as required by SA 570 although there were certain events as evident from the note on Going Concern given in the financial statements of the company, which could cast material uncertainty about Going Concern.
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