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SA 710 deals with the responsibilities of an auditor with respect to comparative information in the audit of the financial statements.

1.Introduction

When the audit of prior period financial statements has been executed by a predecessor auditor or the financial statements weren’t audited, the guidance and requirements in SA 5103 concerning opening balances are also applicable.

2. Nature of Comparative Information

The nature of the comparative information which is presented in financial statements of the entity is governed by the requirements of relevant financial reporting framework.

The two approaches to the reporting responsibilities of an auditor in respect of comparative information include:

A. Corresponding figures

B. Comparative financial statements

The approach which needs to be adopted by an auditor is often stipulated by regulation or law, however, it might also be prescribed in the terms of engagement. The key audit reporting differences between the approaches are:

a) In case of corresponding figures, only the current period is referred for the opinion of the auditor on financial statements; whereas

b) In case of comparative financial statements, each period for which such financial statements are presented is referred for the purpose of auditor’s opinion

3. Objectives

The objectives of the auditor are:

i) To obtain sufficient appropriate audit evidence about whether the comparative information included in the financial statements has been presented, in all material respects, in accordance with the requirements for comparative information in the applicable financial reporting framework

ii) To report in accordance with the auditor’s reporting responsibilities

4. Audit Procedures

An auditor should consider whether financial statements comprises comparative information which are required by relevant financial reporting framework and whether the information so required are classified appropriately. For this purpose, an auditor should assess whether:

i) The comparative information is in agreement with amounts and other disclosures provided in the prior period

ii) The accounting policies which are reflected in comparative information are in-line with the ones applied currently or, in case there have been changes in the accounting policies, whether same are accounted adequately and appropriately presented and disclosed

5. Audit Reporting

A. Corresponding Figures

When the corresponding figures are presented, the opinion of an auditor shouldn’t refer to corresponding figures barring the following circumstances:

i) In case auditor’s report on the financial statement of the prior period, as previously issued, including a disclaimer of opinion, a qualified opinion, or an adverse opinion and matters that required modification which is unresolved

ii) In case an auditor gathers audit evidence that the material misstatement exists in financial statements of the prior period in which previously an unmodified opinion was issued

iii) In case financial statements of the prior period weren’t audited

For the circumstances mentioned in the aforesaid point (1), the auditor should modify his/her audit opinion on financial statements of the current period. In Basis for Modification paragraph in his/her audit report, the auditor should either:

a) Refer to current period as well as the corresponding figures in the description of the matter requiring modification when effects or likely effects of such matter on the figures of the current period are material

OR

b) The auditor in other cases should explain that his/her audit opinion has been modified due to the effects or likely effects of an unresolved matter on comparability of figures of the existing period and such corresponding figures

I. Prior Period Financial Statements Audited by a Predecessor Auditor 

In case the audit of prior period financial statements was performed by a predecessor auditor and the law or regulation permits auditor to refer to the report of the predecessor auditor on corresponding figures and the auditor decides to do so, he/she should state in the Other Matter paragraph in his/her audit report

a) That the audit of prior period financial statements was performed by a predecessor auditor

b) Type of opinion which was expressed by such predecessor auditor and, in case such opinion was modified, the reasons for the same

c) The date of such report

II. Prior Period Financial Statements Not Audited 

In case the audit of financial statements of the prior period didn’t happen, the auditor should state the same in another matter paragraph in his/her audit report that such corresponding figures are unaudited. However, such a statement doesn’t relieve an auditor from his duty of obtaining sufficient adequate audit evidence that opening balances are free of material misstatements which affect the financial statements of the current period.

B. Comparative Financial Statements

When the comparative financial statements are presented, each period for which such financial statements are presented and audit opinion is expressed should be referred for auditor’s opinion.

When reporting on financial statements of a prior period in connection with audit of the current period, if the opinion of the auditor on the financial statements of prior period differs from the opinion expressed by the auditor previously, the auditor should disclose applicable reasons for such different opinion in the Other Matter paragraph as per SA 7068.

I. Prior Period Financial Statements Audited by a Predecessor Auditor

In case the audit of prior period financial statements was performed by a predecessor auditor, along with expressing the opinion on financial statements of the current period, the auditor should mention in the Other Matter paragraph:

a) That the audit of prior period financial statements was performed by a predecessor auditor

b) The type of opinion that was expressed by such predecessor auditor and, in case the opinion was modified, the reasons for the same

c) The date of such report

unless the report of predecessor auditor on financial statements of the prior period is revised with financial statements.

II. Prior Period Financial Statements Not Audited

In case audit of the financial statements of the prior period was not performed, the auditor should mention it in the Other Matter paragraph that such comparative financial statements are unaudited.

However, such a statement doesn’t relieve an auditor from his duty of obtaining sufficient adequate audit evidence that opening balances are free of material misstatements which affect the financial statements of the current period.

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