ISA 710

Comparative Information: Corresponding Figures and Comparative Financial Statements

1Objective and scope

ISA 710 deals with the auditor's responsibilities relating to comparative information in an audit of financial statements. Financial reporting frameworks require comparative amounts and disclosures for the preceding period (IAS 1 requires at least one prior period for every amount reported); how they are presented, and therefore how the auditor reports on them, follows one of two approaches set by the framework, law or the terms of engagement. Under the corresponding figures approach (the approach IFRS and the Companies Act follow, and the one used in Kenya) the comparatives are an integral part of the current period financial statements and the opinion refers to the current period only. Under the comparative financial statements approach the comparatives are separate statements included for comparison and the opinion refers to each period presented. Where the prior period was audited by a predecessor or not audited at all, ISA 510 on opening balances also applies.

The objectives are to obtain sufficient appropriate 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 framework; and to report in accordance with the auditor's reporting responsibilities.

2Key definitions

3Requirements

Audit procedures

• Determine whether the financial statements include the comparative information required by the framework and whether it is appropriately classified. Evaluate whether the comparative information agrees with the amounts and other disclosures presented in the prior period or, where appropriate, has been restated; and whether the accounting policies reflected in the comparative information are consistent with those applied in the current period or, if there have been changes, whether they have been properly accounted for and adequately presented and disclosed (IAS 8).
• If the auditor becomes aware of a possible material misstatement in the comparative information while performing the current period audit, perform such additional procedures as are necessary in the circumstances to obtain sufficient appropriate evidence to determine whether a material misstatement exists. If the prior period was audited by the auditor, the ISA 560 requirements on facts discovered after issue also apply.
• Under the corresponding figures approach the audit procedures on comparatives are ordinarily limited to the above; the comparatives were audited in the prior period (by this auditor or a predecessor) and the current audit tests them only insofar as they are the opening position and are consistent. Under the comparative financial statements approach, if the auditor is reporting on the prior period as well, the evidence must support an opinion on it.
• Request written representations for all periods referred to in the opinion, and a specific representation regarding any restatement made to correct a material misstatement in prior period financial statements that affect the comparative information.

Reporting: corresponding figures

Reporting: comparative financial statements

• The opinion refers to each period for which financial statements are presented and on which an audit opinion is expressed.
• When reporting on the prior period in connection with the current audit, if the opinion on the prior period differs from the opinion previously expressed (because the auditor has become aware of circumstances or events that affect the prior period statements), disclose the substantive reasons for the different opinion in an Other Matter paragraph.
• If the prior period was audited by a predecessor, in addition to expressing an opinion on the current period, state in an Other Matter paragraph that the prior period was audited by a predecessor, the type of opinion and reasons for any modification, and the date of that report, unless the predecessor's report is reissued with the financial statements. If the auditor concludes a material misstatement exists in the prior statements the predecessor reported on without modification, communicate with management and those charged with governance and request that the predecessor be informed; if the prior statements are amended and the predecessor agrees to issue a new report on them, the auditor reports only on the current period.
• If the prior period statements were not audited, state in an Other Matter paragraph that the comparative financial statements are unaudited.

4Documentation and reporting

The file records the check that the required comparatives are present and classified, the agreement of the comparatives to the prior period signed financial statements (or to the restatement working, with the IAS 8 evaluation), the consistency of accounting policies, any additional procedures on a possible misstatement in the comparatives, the consideration of the prior period auditor's report and any unresolved modification, and the representations obtained. The report follows the tables above: under corresponding figures the opinion is silent on the comparatives unless a matter requires a modification, and an Other Matter paragraph handles a predecessor or an unaudited prior period; under comparative financial statements the opinion names every period. Which approach applies is determined by the framework and the engagement, not by the auditor's preference.

5Examinable focus