Comparative information looks simple on the face of a financial statement: the current year appears beside one or more prior-year columns. For the auditor, however, the reporting consequence depends on what those prior-period numbers legally and financially represent. SA 710, Comparative Information—Corresponding Figures and Comparative Financial Statements, separates the issue into two approaches and sets out the audit work and reporting response for each.
ICAI’s current Auditing, Review and Other Standards index lists SA 710 in the 700–799 audit conclusions and reporting series and links to the official full text of SA 710. The Standard also notes that financial reporting frameworks in India typically use the corresponding-figures approach for general-purpose financial statements.
What does SA 710 cover?
SA 710 deals with the auditor’s responsibilities for comparative information included in financial statements. Its two objectives are practical: obtain sufficient appropriate audit evidence that the comparative information is presented, in all material respects, according to the applicable financial reporting framework, and report in accordance with the auditor’s responsibilities.
The Standard recognises two broad approaches: corresponding figures and comparative financial statements. The distinction is not merely terminology because it changes the period or periods to which the audit opinion refers.
Corresponding figures vs comparative financial statements
Corresponding figures
Corresponding figures are prior-period amounts and disclosures included as an integral part of the current-period financial statements. They are intended to be read in relation to the current-period figures. Under this approach, the auditor’s opinion ordinarily refers to the current period only, even though the current financial statements contain prior-period corresponding figures.
Comparative financial statements
Comparative financial statements present prior-period amounts and disclosures for comparison with the current period at a level of information comparable with the current-period financial statements. When those comparative financial statements are audited, the auditor’s opinion refers to each period for which financial statements are presented and on which an audit opinion is expressed.
The practical test
- Ask what the reporting framework requires. SA 710 says the applicable framework determines the nature of comparative information, and law, regulation or the engagement terms may determine the reporting approach.
- Identify what the opinion covers. Current period only generally points to corresponding figures; an opinion on each presented period points to comparative financial statements.
- Do not infer the approach merely from a two-column statement. The legal and reporting character of the comparative information matters more than visual presentation.
What audit work is required on comparative information?
SA 710 requires the auditor to determine whether the financial statements contain the comparative information required by the applicable reporting framework and whether it is appropriately classified. The auditor then evaluates two important consistency points.
- Check whether the comparative information agrees with the amounts and disclosures presented in the prior period.
- Check whether the accounting policies reflected in the comparative information are consistent with the current period. If policies changed, verify that the change has been properly accounted for and adequately presented and disclosed.
If a possible material misstatement in the comparative information comes to light during the current audit, the auditor performs additional procedures needed to determine whether a material misstatement exists. Where the auditor also audited the prior period, SA 710 directs attention to the relevant requirements of SA 560.
How do written representations work?
The period covered by the opinion also affects written representations. For comparative financial statements, representations are requested for all periods referred to in the auditor’s opinion. For corresponding figures, representations are requested for the current-period financial statements because the opinion is on those financial statements, which include the corresponding figures. SA 710 additionally requires a specific written representation for a prior-period item that is separately disclosed in the current year’s statement of profit and loss.
Reporting issues auditors commonly face
1. A prior modified opinion remains unresolved
Suppose last year’s auditor issued a qualified, adverse or disclaimer opinion and the underlying matter remains unresolved. Under the corresponding-figures approach, SA 710 requires the current auditor to modify the current-period opinion. Depending on the circumstances, the Basis for Modification explains the effect on current figures or explains how the unresolved matter affects comparability between current figures and corresponding figures.
2. A prior-period misstatement is discovered after an unmodified opinion
If the auditor obtains evidence that the prior-period financial statements contained a material misstatement even though an unmodified opinion had previously been issued, the auditor checks whether the misstatement has been dealt with as required by the applicable financial reporting framework. If it has not, SA 710 requires a qualified or adverse opinion on the current-period financial statements with respect to the corresponding figures.
3. The prior period was audited by a predecessor auditor
For corresponding figures, where law or regulation permits reference to the predecessor auditor and the current auditor decides to make that reference, an Other Matter paragraph states that the prior-period financial statements were audited by the predecessor, the type of opinion expressed and, if modified, the reasons, and the date of that report.
4. The prior period was unaudited
If prior-period financial statements were not audited, SA 710 requires an Other Matter paragraph stating that the corresponding figures are unaudited. That disclosure does not remove the auditor’s responsibility to obtain sufficient appropriate evidence that opening balances do not contain misstatements that materially affect the current-period financial statements. This is where SA 510 on opening balances becomes especially relevant.
5. Comparative financial statements are presented
When the financial statements are comparative financial statements rather than corresponding figures, the auditor’s opinion refers to each period presented and audited. If the auditor’s current opinion on a prior period differs from the opinion previously expressed on that same period, SA 710 requires the substantive reasons for the difference to be disclosed in an Other Matter paragraph in accordance with SA 706.
A practical SA 710 review checklist
- Confirm whether the reporting framework calls for corresponding figures or comparative financial statements.
- Trace prior-period comparative amounts and disclosures back to the prior financial statements.
- Check accounting-policy consistency and the treatment and disclosure of any policy change.
- Investigate indicators of material misstatement in comparative information rather than assuming last year’s audit closes the issue.
- Identify whether the prior period was audited by the same auditor, a predecessor auditor or not audited at all.
- Review the prior auditor’s opinion and determine whether any modification remains unresolved.
- Determine whether an Other Matter paragraph is required for predecessor-auditor or unaudited-comparative circumstances.
- Align written representations with the period or periods covered by the audit opinion.
- Document why the final auditor’s report appropriately addresses the comparative-information approach used.
SA 710 vs SA 510: do not confuse the two
SA 710 focuses on comparative information and the related audit reporting. SA 510 focuses on opening balances in an initial audit engagement. They can operate together. SA 710 expressly says that when the prior-period financial statements were audited by a predecessor auditor or were unaudited, the requirements and guidance in SA 510 regarding opening balances also apply.
Practical takeaway
The fastest way to analyse an SA 710 issue is to start with the reporting approach, not the appearance of the financial statements. First establish whether the comparatives are corresponding figures or comparative financial statements. Then verify agreement with the prior period, policy consistency, possible misstatements and the audit history of the prior period. Finally, make sure the audit opinion and any Other Matter or modification language match that classification. This sequence keeps comparative-information testing, opening-balance work and reporting responsibilities from being mixed together.
