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Home » Blog » Obligation of auditor when his opinion is based on related party auditor’s report and legal opinion

Obligation of auditor when his opinion is based on related party auditor’s report and legal opinion

  • Blog|News|Account & Audit|
  • 2 Min Read
  • By Taxmann
  • |
  • Last Updated on 25 January, 2022

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Ind AS 36 (Impairment of Assets); audit of financials

As per the provisions of Ind AS 36 (Impairment of Assets), Company should assess indicators of impairment of an asset at the end of the financial year which are internal and external indicators, low market capitalization in comparison to the carrying amount is one of the external indicators.

Practical problem which may arise during the audit of financials

S Ltd. provides an integrated platform with the technical, managerial, financial, and governance framework to support and participate in the highway development programme. The working paper of the auditor of the company shows that the company recorded its investment in shares of associate company A Ltd. which engaged in engineering, procurement, construction of real estate development projects, at cost on the balance sheet date instead of fair value, which was lower than its cost.

The auditors of the associate company provided in their audit report that decline in fair value of shares occur due to loss which was incurred as a result of the suspension of toll collection by order of the High Court and under EOM para provided that the company’s appeal was pending before the Supreme Court against loss which was incurred due to suspension of toll collection and based on a legal opinion, the board relied upon that company will receive compensation, and auditor of associate company provided in its notes that the underlying value of the intangible and other assets is not impaired. Our opinion is not modified in respect of this matter. Also, a legal opinion was obtained by the Company on the order of the high court which was appealed in the supreme court which estimated some benefits accruing to the associate company.

On the basis of management representation which is supported by legal opinion and associate company auditors report, the auditor of the company emphasized the above matter in their audit report and concluded that our opinion is not modified in respect of this matter. Whether the audit opinion made by the auditor is correct? If not, what are the responsibilities that an auditor lacks while performing the audit?

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied
View all posts by Taxmann

Author TaxmannPosted on January 25, 2022Categories Blog, News, Account & Audit

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Previous Previous post: NCLT to pass fresh orders as no opportunity of being heard was given to Appellants against oppression plea: NCLAT
Next Next post: OPs were guilty of anti-competitive practices for indulging in cartelization of Hitachi Carbon Brushes: CCI

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