CARO's clause 3(xxi) applies where consolidated financial statements are being reported on, and requires stating whether there are any qualifications or adverse remarks by the respective auditors in the CARO reports of the companies included in the consolidated financial statements — subsidiaries, associates and joint ventures — and if so, specifying the clauses of the CARO report containing the qualifications or adverse remarks. This is explicitly a consolidation and roll-up exercise: the group auditor reports on what the component auditors already concluded in their own CARO reports, rather than independently re-evaluating each subsidiary's CARO clauses from scratch.
What the group auditor actually does
- 01Obtain the CARO report (or equivalent) for every subsidiary, associate and joint venture included in consolidationFrom the respective component auditor, as part of the normal SA 600 component-reporting process.
- 02Identify any qualification or adverse remark in each oneReviewed for existence and nature, not re-tested — the group auditor relies on the component auditor's own conclusion on that company's CARO clauses.
- 03Specify the exact clause numbers qualified, for each affected componentA reader of the group CARO report needs to know specifically which clause, at which component, carried a qualification — a general statement that "some subsidiaries had qualifications" doesn't satisfy the requirement.
- 04Compile this into the group's own CARO report under clause 3(xxi)As its own distinct item, separate from the group auditor's own direct findings on the parent company's clauses.
Common practice, not a requirement
This clause is specifically about qualifications already reported by component auditors in their OWN CARO reports — it is not the mechanism for the group auditor to raise a fresh CARO concern about a subsidiary that the component auditor's own report didn't flag. A disagreement with a component auditor's conclusion is addressed through the SA 600 evaluation process, not inserted directly into this clause.
A group CARO report that states "no qualifications in subsidiary reports" without the group team having actually obtained and reviewed every component's CARO report is an unsupported conclusion — the absence of a documented review, not just the absence of a qualification, is itself the gap a reviewer should catch.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- CARO & Companies ActCARO 2020 reporting checklist for statutory auditorsThe topic areas CARO reporting covers, what evidence each one needs, and how the clauses fit together across the audit file.
- Audit workflow & automationSA 600: group audits, and the group auditor's responsibility for component auditors' workUsing another firm's work on a subsidiary doesn't transfer responsibility for the group opinion. SA 600 is explicit about what stays with the group auditor regardless.
- Audit data & extractsConsolidating multi-branch data for a single auditSeparate company files per branch, inter-branch transfers that need eliminating, and vendors shared across branches that look like duplicates. Consolidating multi-branch data before testing starts.
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