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SA 710 — Comparative Information

When a company presents its financial statements, it almost always shows two years of numbers side by side — this year and last year. SA 710 tells the auditor exactly what to do with those prior-year figures. The core question it answers: how deeply must you audit the numbers that aren't from the current year?

SA 710 recognises two very different presentations. The first is Corresponding Figures — where the prior year's numbers are shown purely for comparison, tagged to the current year's figures (think: the tiny column on the right in most Indian company Balance Sheets under Schedule III). Here, the auditor's opinion covers the current period only; the prior year column is just context. The auditor is not re-expressing an opinion on last year. The second type is Comparative Financial Statements — where both years are given equal weight and the auditor's report explicitly covers both periods. This is less common in India but does appear in certain group reporting contexts.

Now, the really exam-important scenarios. Scenario 1: The prior year was audited by a different auditor (a predecessor). Under corresponding figures, the current auditor does not refer to the predecessor's report in the opinion — they simply audit current-year figures. Under comparative financial statements, the current auditor may refer to the predecessor's report, or re-audit the prior figures. Scenario 2: The prior year figures have been restated (say, due to an error correction under AS 5 / Ind AS 8). The current auditor must evaluate whether the restatement is proper and, if material misstatement remains, modify the opinion accordingly. Scenario 3: If the prior-year opinion was modified and that matter is still unresolved in the current year, the current auditor should also modify the current opinion. If the prior-year matter is now resolved, no modification is needed — but the auditor may add an Emphasis of Matter paragraph for transparency. This is asked frequently as a 4–6 mark scenario-based question — they give you a situation and ask whether modification is required.

📊 Worked example

Example 1 — Corresponding Figures, Prior Year Modified

Rajesh & Co. Pvt. Ltd. had its FY 2023-24 audit done by CA Mehta, who gave a qualified opinion because inventory worth ₹18,00,000 could not be verified (the warehouse records were damaged). In FY 2024-25, the company appoints CA Iyer as the new auditor.

Question: The inventory issue from FY 2023-24 has been fully resolved. The FY 2024-25 figures are clean. What should CA Iyer do?

Working:

  • Corresponding figures are used (standard Indian practice). CA Iyer's opinion covers FY 2024-25 only.
  • The prior-year qualification (₹18,00,000 inventory) is now resolved — it is NOT carried forward as a qualification.
  • However, since it was a material matter, CA Iyer considers adding an Emphasis of Matter paragraph noting that the prior year figures (as audited by CA Mehta) contained a qualification that has since been resolved.
  • No modification to current year opinion is required.

Final Answer: Unmodified opinion on FY 2024-25. Optional Emphasis of Matter for the resolved prior-year matter.

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Example 2 — Restatement of Prior Year Figures

Ms. Sharma's company, Bright Exports Ltd., discovers in FY 2024-25 that depreciation for FY 2023-24 was understated by ₹12,50,000 (a prior-period error). The company restates the FY 2023-24 comparatives shown in the FY 2024-25 financial statements.

Question: What is the auditor's responsibility under SA 710?

Working:

  • Step 1: Check whether the restatement of ₹12,50,000 is correctly done per AS 5 (prior-period items) or Ind AS 8.
  • Step 2: Verify that the restated FY 2023-24 column correctly reduces retained earnings by ₹12,50,000 (post-tax effect) and increases accumulated depreciation by ₹12,50,000.
  • Step 3: If the restatement is correct and properly disclosed — no modification needed.
  • Step 4: If the company refuses to restate despite the material error — the auditor must qualify the current year opinion.

Final Answer: If restatement is proper → Unmodified opinion. If not restated → Qualified opinion citing material misstatement in comparative figures.

⚠️ Common exam mistakes

  • Students mix up Corresponding Figures and Comparative Financial Statements. Remember: Corresponding Figures = opinion on current year only (India's default). Comparative Financial Statements = opinion explicitly covers both years. Don't say the auditor 'audits both years' just because two columns are shown.
  • Students think a prior-year modification automatically means a current-year modification. Wrong. If the prior-year issue is resolved, no carry-forward modification is needed. Only if the matter is still unresolved does it affect the current opinion.
  • Ignoring the predecessor auditor distinction. Under corresponding figures, the current auditor does NOT refer to the predecessor's report at all. Under comparative financial statements, they may. Don't mix up the two treatments in exam answers.
  • Forgetting SA 710 is silent on opening balances. SA 710 deals with comparative figures — opening balances are governed by SA 510 (Initial Audit Engagements – Opening Balances). Don't apply SA 710 rules to opening balance problems.
  • Not mentioning 'Emphasis of Matter' as an option. When a prior-year matter is resolved, a common examiner expectation is that you mention the auditor may include an Emphasis of Matter paragraph — not just that 'no modification is needed.' Always mention both parts of the answer.
📖 Reference: SA 710 — Institute of Chartered Accountants of India
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