In: Accounting
2) Vision Group is a parent company with a number of wholly owned subsidiaries. One of these, Courts Fiji Ltd, is a self-sustaining foreign subsidiary with manufacturing and distribution facilities throughout the Pacific. While the Vision group prepared its financials for the year ended 30 June 2017 the accounts included all the subsidiaries except Courts Fiji Ltd which was attached separately. The Financials included a note stating that the senior executives believe it would be misleading to consolidate Courts Fiji Ltd due to its unique and different operations from all other subsidiaries within the vision group. The note also shows details of the intra-group transactions.
Required : For this scenario discuss the audit issues to be considered and what impact these issue would have on the audit opinion. You may also justify the answer using relevant legislation such as the Corporations Act and relevant auditing standards.
Answer:-
A parent is required to present consolidated financial statements in which it consolidates its investments in subsidiaries [IAS 27.9] – with the following exception:
A parent is not required to (but may) present consolidated financial statements if and only if all of the following four conditions are met: [IAS 27.10]
The consolidated accounts should include all of the parent's subsidiaries, both domestic and foreign: [IAS 27.12]
Hence as mentuioned above in this case Vision Group was not right in excluding financials of its subsidiary Courts Fiji Ltd while presenting consolidated accounts.
The users of financial statements may not be able to form a proper view of accounts. The auditor in this case also needs to qualify his report or may even express disclaimer of opinion.