Audit of Consolidated Financial Statements
Auditing the group as a single whole
Go to the Mandatory Audit serviceChecked against the official source:
Consolidated financial statements present a group of companies as if it were a single entity. The main risk here lies not in individual entries of subsidiaries but in the consolidation process itself: intragroup turnover that has not been eliminated can distort group revenue by any amount.
Who prepares consolidated financial statements
- public interest entities keep their accounts under IFRS from the year following their inclusion in the Register (Presidential Resolution PP-282);
- companies that prepare consolidated IFRS financial statements also prepare separate IFRS financial statements (PP-282);
- joint-stock companies publish annual IFRS financial statements after an audit under ISA (Article 102 of the Law on Joint-Stock Companies).
Group audit (ISA 600)
- materiality for the group and for components;
- component auditors and instructions from the group auditor;
- elimination of intragroup transactions and unrealised profit;
- testing the consolidation perimeter and control.
What is tested first
- Completeness of the consolidation perimeter: whether all controlled companies are included
- Elimination of intragroup transactions, balances and unrealised profit
- Uniform accounting policies across the group
- Calculation and presentation of non-controlling interests
- Translation of subsidiaries' financial statements into the presentation currency
Working with subsidiaries' financial statements
The group auditor is responsible for the opinion on the consolidated financial statements as a whole. If some group companies are audited by other auditors, the group auditor sets up cooperation with them: scope of work, instructions and the procedure for receiving results are agreed in advance, not at the end of the audit.
A common mistake
Mechanically adding up subsidiaries' statements without fully eliminating intragroup turnover is the most widespread problem. It is especially visible where goods are resold within the group or companies provide services to each other.
Discuss a group audit
We will assess the consolidation perimeter and propose how to organise the audit across the group.
Go to the Mandatory Audit serviceFrequently asked questions
Does each group company need its own audit?
The obligation is determined separately for each legal entity under Article 35 of Law ZRU-677. An audit of the consolidated financial statements does not replace those obligations.
Are separate financial statements needed if consolidated statements are prepared?
Yes, companies that prepare consolidated IFRS financial statements also prepare separate ones (Presidential Resolution PP-282).
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