A brief on – How to do IFRS Audit


IFRS (International Financial Reporting Standards) audit is one of the chanting word among the Indian companies. It is just like preparing a Balance Sheet but it is prepared as per International Financial Reporting Standards. Usually, it is seen that many MNC’s  company has its branch offices in India and they want to analyze the financials of the company as per IFRS rather than Indian Accounting Standards. Moreover, it has been seen that many foreigners are interested to invest in the Indian Companies and they too want to see the future outcomes in a standard form.

Today more than 100 countries are adopting the policies and standards as International Accounting Standard Board does and which develops International Financial Reporting Standards. So, countries where foreign trade is an important part of the economy  are expected to adopt IFRS. It is not a different topic or a new concept that needs a special effects, but what needs to take into consideration is the treatment of different accounting elements according to International Financial Reporting Standards. While Indian Accounting Standard is maintained for an accounting period from April to March but for IFRS the accounting period is maintained from January to December.

So, those companies who maintains his accounting books on the basis of Indian Accounting Standards then such companies have to close their accounting balances twice a period i.e. March and December. Moreover, the provisional entries which were passed at the end of March is also required to be passed at the end of the December, so that the closing entries should be matched with opening entries.

A Quick Snapshot of the steps to be followed while auditing & preparing balance sheet:


  1. Be sure that opening balance of Ledgers are reconciled,
  2. Vouching & Verification elements are completed and the queries arise from there are discussed at initial level,
  3. Scrutiny of Ledgers and reconciliations of accounts should be completed by the senior Audit staff,
  4. All queries should be settled before drafting balance sheet and audit report,
  5. TDS receivables should be matched with the 26AS,
  6. Take balance confirmation of bank accounts and the same should be tallied with the books,
  7. Take the bills of fixed assets for the purpose of filling,
  8. Any report issued by the experts like building valuations, Guatuity Report, legal Filings report, Contingents Report, Internal Audit Report, Service Tax report etc. should be analyzed and take necessary documents.
  9. After the completion of audit which is generally as the statutory audit of the company, prepare necessary adjustments for making balance sheets.

Steps to be followed before drafting a balance sheet:


  1. First of all collect the signed balance sheet of Previous year so that opening balance should be ticked out and should be tallied with previous year closing.
  2. Ask management for the splited data for the period which you are doing the audit, as normally the books are maintained from April to March,
  3. Make sure that all the entries has been passed till the month of december (including the provision for indirect expenses and other regular nature of Expenses)
  4. All prepaid expenses should be booked from the date of its occurance till the end of December.
  5. Special nature of expenses as Provision for audit fee, Provision for Wealth Tax should be entered on provisional basis,
  6. Provision for expenses which were made for the period April to March, should be bifurcated from January to December,
  7. Provision for Tax should be calculated for the said period,
  8. Depreciation should be calculated as per Life Basis for the said period,
  9. Closing Stock should be taken as on 31st December, 20XX,
  10. Valuation of Inventories should be taken on cost basis as on 31st December, 20XX. No specific classification requirements is required as it is done in Schedule VI interms of (Raw Materials, WIP, Finished goods, Loose Tools, Others),
  11. When items of income or expense are material, their nature and amount are separately disclosed,
  12. A statement of changes in equity is presented showing (a) the total comprehensive income for the period (b) effects of retrospective application or re-statement on each component of equity (c) for each component of equity, a reconciliation between opening and closing balances, separately disclosing changes resulting form (i) profit or loss (ii) each item of other comprehensive income and (iii) transactions with owners in their capacity as owners, showing separately contributions by and distributions to owners and changes in ownership interests in subsidiaries that do not result in a loss of control
  13. Extraordinary items are disclosed separately in the statement of profit and loss and are included in the determination of net profit or loss for the period. Items of income or expense to be disclosed as extraordinary should be distinct from the ordinary activities and are determined by the nature of the event or transaction in relation to the business ordinarily carried out by an entity.
  14. Deferred taxes are computed for temporary differences between the carrying amount of an asset or liability in the statement of financial position and its tax base. Deferred income taxes are recognised for all temporary differences between accounting and tax base of assets and liabilities except to the extent which arise from (a) initial recognition of goodwill (in the case of deferred tax liabilities) or (b) asset or liability in a transaction which (i) is not a business combination; and (ii) at the time of the transaction, affects neither the accounting nor the tax profit. Current tax and deferred tax is recognised outside profit or loss if the tax relates to items that are recognised in the same or a different period, outside profit or loss. Therefore, the tax on items recognized in other comprehensive income or directly in equity, is also recorded in other comprehensive income or in equity, as appropriate.
  15. In case of investment property measured using fair value model, for measuring deferred taxes, there is a rebuttable presumption that the carrying amount will be recovered through sale.

How to draft a Balance sheet:

Balance sheet preparing for the purpose of IFRS is slightly different from the normal balance sheet prepared for the Indian Companies.

Balance Sheet as per IFRS                                                                     Balance Sheet as per Companies Act, 2013

  Capture                                            Capture2

As shown in the figure, the presentation of Balance sheet as per Companies Act, 2013 and IFRS are quite different. In IFRS the Balance sheet starts with Assets while in Balance Sheet as per Companies Act, 2013 it starts with Liabilities parts and then with the Assets categories. So, the presentation part is only different not the elements of the Balance Sheet. So, the said balance sheet will be prepared in the same manner as it is prepared while considering Companies Act, 2013. You can prepared your balance sheet from here:

Draft a Balance Sheet

Hope, you are now able to draft a balance sheet as per IFRS after analyzing all the elements of audit and following the steps mentioned above.


Happy Reading!!

Published by

Shushant mallik ( Chartered Accountant & Cost Accountant )

Shushant is a Chartered Accountant and a Cost Accountant. He has secured All India Rank-34 in CMA Final Exams. He is a Financial Controller at Mount Meru Soyco Limited, Rwanda. He is a administrator of this site . In his spare time he hang out with his friends and discuss about the current issues in market. You can find his latest blog posts at www.enrollmyexperience.com and at his facebook profile.

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