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Q1: IF there is a material inconsistency between what has reported in the financial statements and what is reported in the directors’s report when the “other information” is misstated,not the financial statements,,then what is its impact on the report??whether an emphasis of matter paragraph is suitable or other matters paragraph is suitable??and why??
Q2: a company(subsidiary) is incorporated before the year end and the auditor of the group(parent) comes to know this after the year end but before the audit report,,what are its report implications??please exlain it in terms of materiality,pervasiveness and the disclouses …………..waiting for your reply sir ….thanks
A1 – “Other matters”
A2 – Two elements here! What on Earth are the directors doing creating a subsidiary just before the year end and conveniently forgetting it when asked to sign a “written representations” letter?
Secondly, I think that no matter the quantitative materiality of the new subsidiary, this looks like a situation where qualitative materiality comes in. IF ( and I emphasise IF ) the new subsidiary is merely a preparatory move in readiness for a new launch in some distant country and there have been NO transactions related to it, I suppose it can be ignored on the basis of materiality. However, per your post “and the auditor of the group(parent) comes to know this after the year end but before the audit report”, I think the auditor should be put on guard! What else has “accidentally” been omitted from the information given to the auditors? This now leads on to deeper issues like the reliability / honesty of the board. Do we really wish to continue working with / for an apparently reckless / dishonest board?
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