SA 720 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
The audited financial statements sit inside an annual report that also carries narrative and numbers the auditor has not audited. SA 720 requires the auditor to read that other information and to act if it contradicts the statements, or the auditor's knowledge from the audit, or appears to be wrong.
SA 720 (Revised), as effective for audits of financial statements for periods beginning on or after 1 April 2018, applies to other information in an entity's annual report, whether financial or non-financial. ICAI may revise standards, so check icai.org for the current text. A narrative that ties to the accounts is easier to deliver with compliance advisory review. The report wording is in SA 720 part 2.
The auditor does not give an opinion on other information and is not required to gather extra evidence about it (paragraph 2). But the auditor must obtain the final version of the annual report in time, read it, compare selected amounts with the financial statements, and consider it against what the auditor learned in the audit. If something looks inconsistent or misstated, the auditor discusses it with management, asks for a correction and, if that is refused, escalates to those charged with governance and considers the effect on the report.
Scope (paragraphs 1-9)
The standard covers other information, financial or non-financial, other than the statements and the auditor's report, included in an annual report (paragraph 1). The opinion on the statements does not cover it, and the standard does not require evidence beyond that needed for the opinion (paragraph 2). The reason for reading it is that material inconsistencies with the statements or with what the auditor knows may signal a misstatement of the statements or of the other information, undermining credibility and influencing users' decisions (paragraph 3). The work also helps the auditor avoid association with information that is false or misleading under the ethical code (paragraph 4).
Other information includes amounts meant to be the same as, summarise or give greater detail about amounts in the statements, other amounts the auditor knows about from the audit, and other matters (paragraph 5). The responsibilities apply whether the information is obtained before or after the date of the auditor's report (paragraph 6). The standard does not apply to preliminary announcements of financial information or securities offering documents such as prospectuses (paragraph 7). It is not an assurance engagement on the other information (paragraph 8), and law may add obligations (paragraph 9).
| Term (paragraph 12) | Plain meaning |
|---|---|
| Annual report | A document or documents, usually prepared yearly by management or governance under law, regulation or custom, giving owners information on operations, results and position; it contains or accompanies the statements and the auditor's report |
| Other information | Financial or non-financial information, other than the statements and the auditor's report, in the annual report |
| Misstatement of the other information | The other information is incorrectly stated or misleading, including by omitting or obscuring information needed to understand a matter |
The application material helps with what counts. Law, regulation or custom may define the annual report, and it may be one document or several; a directors' report, a chairman's statement and corporate governance reports may form part of it (A3). Standalone reports such as industry or regulatory reports, corporate social responsibility, sustainability and similar reports, and regulatory filings with government agencies such as the Registrar of Companies are not typically part of the annual report (A5). Disclosures required by the framework but placed outside the statements form part of the statements, not other information (A9), and XBRL tags are not other information (A10). Omitting a key performance indicator that management otherwise uses can make other information misleading (A6). In the Indian context, the board's report is commonly part of this set; our post on the board report (directors' report) contents explains its contents.
Obtaining the other information (paragraph 13)
The auditor must:
- determine with management which documents make up the annual report and when and how they will be issued;
- arrange to get the final version in time, if possible before the date of the auditor's report; and
- where some of it will only be available later, ask management for a written representation that the final version will be provided to the auditor when available, and before issue, so that the work can be completed.
Obtaining it before the report date allows changes to be made to the statements, the report or the other information before issue (A18). Where the directors' report and other reports are to be approved by those charged with governance, the final version is the approved one; the footnote adds that the auditor needs to be aware of the Companies Act, 2013 provisions on availability of such reports (A15). The auditor is not precluded from dating the report if some or all of the other information has not been obtained (A20), and has no duty to search the entity's website (A19). The auditor may also seek representations that management has listed all documents it expects to issue and that the other information is consistent with the statements (A22; see SA 580).
Reading and considering (paragraphs 14-15)
| Step | What the auditor does | Paragraph |
|---|---|---|
| Compare with statements | Compare selected amounts or items meant to be the same as, summarise or give detail about statement items, to evaluate consistency | 14(a) |
| Compare with audit knowledge | Consider whether the other information is materially inconsistent with the auditor's knowledge, in the context of the evidence and conclusions of the audit | 14(b) |
| Stay alert | Remain alert for signs that other information unrelated to the statements or audit knowledge appears materially misstated | 15 |
The auditor is not required to compare every item; selection is a matter of judgement, looking at the significance of the item (such as a key ratio), its relative size and its sensitivity (for example share-based pay for senior management) (A26-A27). Procedures include comparing figures, comparing the words used where wording is meant to convey the same meaning as a disclosure, and getting and checking a reconciliation from management (A28). Auditor knowledge includes the understanding of the entity under SA 315 and matters that are forward-looking, such as the outlook considered when evaluating impairment assumptions or going concern (A31-A32); often the auditor's recollection of the audit, such as discussions with management or board minutes, is enough (A34). The engagement partner considers who on the team should do the work, with simple tie-outs suitable for less experienced members (A24).
Responding to problems (paragraphs 16-20)
If a material inconsistency appears to exist, or the other information appears materially misstated, the auditor discusses it with management and, if necessary, performs other procedures to conclude whether (paragraph 16):
- the other information is materially misstated;
- the financial statements are materially misstated; or
- the auditor's understanding of the entity needs updating.
If the other information is materially misstated, the auditor asks management to correct it. If management agrees, the auditor checks the correction has been made. If it refuses, the auditor tells those charged with governance and asks for the correction (paragraph 17).
| Timing of the other information | If not corrected after governance is told | Paragraph |
|---|---|---|
| Obtained before the report date | Appropriate action: consider the implications for the auditor's report and tell governance how the auditor plans to deal with it in the report; or withdraw where law allows | 18 |
| Obtained after the report date | If corrected, perform the procedures needed; if not, take appropriate action, considering the auditor's legal rights and obligations, to seek to have the uncorrected misstatement brought to the attention of users | 19 |
If the work leads the auditor to conclude that the financial statements are materially misstated, or the understanding of the entity needs updating, the auditor responds under the other SAs (paragraph 20). If other information comes in after the report date, the auditor is not required to update the procedures on subsequent events (A21; see SA 560).
Illustrative example
Corona Auto Components Ltd is an invented listed company; all figures are illustrative. Before signing on 20 May, the auditor obtains the draft annual report, with the final version to follow. Management gives a representation that the final version will be supplied before issue. The auditor compares the revenue by product table in the management discussion with the notes (agreed), the cash flow ratio in the highlights with the statements (a transposition: 2.4 instead of 1.4), and a statement that "no borrowings were repaid during the year" with the auditor's knowledge of a Rs 20 crore term loan repayment. The auditor discusses both with management, who correct the ratio. On the repayment statement, management first refuses; the auditor takes it to the audit committee, which asks for the correction.
Need help preparing the annual report?
An annual report that ties to the statements, with tables reconciled and narrative checked, avoids last-minute differences with the auditor. TaxClue's compliance advisory team can help you review the narrative, ratios and board report content against the final accounts before the report date.
Key takeaways
- The auditor reads the other information but gives no opinion or assurance on it.
- Arrange early for the final annual report to reach the auditor before the report date.
- Selected amounts are compared with the statements; narrative is compared with audit knowledge.
- A material misstatement leads to a request to correct, then escalation to governance.
- Refusal can lead to a report statement, or withdrawal where law allows.
Read next
- SA 720 part 2: the Other Information section
- SA 700 part 2: elements of the auditor's report
- SA 580: written representations
- Board report contents and filing
Disclaimer: Based on the Standards on Auditing and quality standards issued by the Institute of Chartered Accountants of India, in the versions named in the article, and ICAI's announcement of 31 March 2026 on SQM 1 and SQM 2, as consulted on 3 October 2026. ICAI revises standards from time to time; check the current text and effective dates on icai.org. This article is general information, not legal advice; check the official text before acting.