Section 406(1) requires the auditor to state the auditor’s opinion on the following matters:
(a) whether the financial statements have been properly prepared in compliance with the CO; and
(b) in particular, whether the financial statements –
(i) in the case of annual financial statements of a company that does not fall within the reporting exemption for the financial year, give a true and fair view of the financial position and financial performance of the company as required by section 380; or
(ii) in the case of annual consolidated financial statements of a company that does not fall within the reporting exemption for the financial year, give a true and fair view of the financial position and financial performance of the company and all the subsidiary undertakings as required by section 380.
Difference in the criteria between HKFRS 10.4(a) and s379(3)
There may appear to be a difference in the criteria between HKFRS 10.4(a) and s379(3) as to which entities should prepare consolidated financial statements, it follows from s406(1) that it is not necessary for the auditor to qualify the auditor’s report on the financial statements of a Hong Kong incorporated company for non compliance with HKFRS 10 in this specific situation if all of the following conditions are met:
the company falls within s379(3) of the CO and is therefore not required by the CO to prepare consolidated financial statements;
the company has followed the requirements of s379(3) and has therefore prepared company level financial statements; and
those company level financial statements comply with those HKFRSs which are applicable to the preparation of company level financial statements, as well as all other requirements of the CO relating to the contents of company level financial statements as set out in sections 380 and 383.