Consolidated financial statements - audit of the capital group

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Audit of consolidated financial statements

Consolidated statements

Consolidated financial statement is a key document for every capital group. It serves as a showcase for investors, banks, contractors, and financial institutions, which base their key investment and lending decisions on them. A professional audit of consolidated financial statements guarantees not only full compliance with applicable accounting standards (IFRS/IAS, Accounting Act) but, above all, it builds credibility and trust for the entire group on the market.

The most common challenges we help solve:

Risk of consolidation errors: we verify the consolidation process, intercompany transaction settlements, and investment valuations.
Complexity of the group structure: we verify the presentation of complicated holding structures, internal transactions, and changes in equity.
Compliance with regulations: we verify the consolidated statements' compliance with the binding accounting standards and legal regulations.
Effective time management: thanks to our efficient approach, we limit the time-consumption of the audit process.

Audit of consolidated financial statements at Crowe – scope of service

Comprehensive audit of consolidated financial statements

Including the consolidated balance sheet, income statement, cash flows, statement of changes in capital and additional information in accordance with IFRS/IAS and the Accounting Act.

Recommendations for improvements

Recommendations for improvements in the consolidation process

Elimination of audit risks

We effectively detect areas requiring correction, both in the consolidated balance sheet and in other elements of the report, minimizing the risk associated with reporting.

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Our approach to auditing capital groups:

Involvement of partners and key statutory auditors at every stage of the audit.
A permanent, experienced audit team, working on group statements for many years.
Effective project management – we use audit schedules that allow for meeting reporting deadlines.
High quality of documentation and transparent communication with the client.
Individual approach – we adjust the scope of the audit to the group’s needs and specifics.

Our Experience

Audit of consolidated financial statements r4

We possess many years of experience in auditing both domestic and international capital groups. Our auditors have participated in auditing the financial statements of groups with various business profiles, including manufacturing, trade, service, and technology.

We have conducted consolidated audits for groups with a structure encompassing several companies, including foreign entities accounting according to various accounting standards (IFRS, US GAAP, local standards).

Case Study

A client from the manufacturing sector began working with Crowe by commissioning the audit of standalone financial statements of selected companies in Poland.

We currently conduct a comprehensive audit of the consolidated financial statements of the entire Group, which includes companies in several European countries, engaging not only the Crowe audit team in Poland but also Crowe audit teams from other European countries. This allows us to apply a uniform approach to the client across the entire Group, using the same audit methodology.

We also ensure effective communication between the Group auditor and the auditors of the companies within the Group, as well as between the individual auditors and the Group Management Board.

Thanks to a permanent team, good communication, and knowledge of the client’s industry specifics, we have significantly accelerated the year-end closing and reporting processes to the management board and investors.

What Distinguishes Us?

Direct partner involvement – junior consultants do not only conduct the audit.
Permanent project team – our key auditors have been collaborating with clients for many years, ensuring efficiency and excellent understanding of the group’s operations.
International experience – we effectively coordinate research for groups of individuals in different jurisdictions.
Timeliness and flexibility – we respect our clients’ time and adapt our research schedule to their operational needs.
Proactive approach – we identify potential risks before year-end, giving you time to take appropriate action.

Contact Us!

Want to ensure your consolidated financial statements meet the highest quality standards?
We encourage you to contact us – we will prepare a tailored offer for your capital group.

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Which entities are required to prepare and audit consolidated financial statements?

1. Dominant entities (parent companies)

The obligation applies to the parent entity, i.e. the company that:

has control over one or more subsidiaries (control = ability to direct the financial and operating policy of the subsidiary),
exercises actual influence through majority voting, contracts or other forms of domination.

2.Capital Groups Meeting the Size Criteria

The parent company may not prepare consolidated financial statements if, as at the balance sheet date of the financial year and as at the balance sheet date of the year preceding the financial year, the aggregate data of the parent company and all subsidiaries at all levels:

Before consolidation eliminations, they did not exceed at least two of the following three values:
- PLN 48,000,000 – in the case of the total balance sheet assets at the end of the financial year,
- PLN 96,000,000 – in the case of net revenues from the sale of goods and products for the financial year,
- 250 people – in the case of average annual employment in full-time equivalents, or
After consolidation eliminations, they did not exceed at least two of the following three values:
- PLN 40,000,000 – in the case of the total balance sheet assets at the end of the financial year,
- PLN 80,000,000 – in the case of net revenues from the sale of goods and products for the financial year,
- 250 people – in the case of average annual employment in full-time equivalents.

3. Public Companies (Issuers of Securities)

For listed companies, the obligation to consolidate and audit a consolidated entity always exists, regardless of whether the thresholds are met. This stems from IFRS/IAS requirements and capital market regulations and also applies to all subsidiaries.

Units Exempt from the Obligation

Some parent entities may be exempt from the obligation to prepare consolidated financial statements, e.g.:

when the group does not exceed the thresholds (small capital group),
when the parent company is also a subsidiary of another company and its data is already consolidated at a higher level (so-called exemption from consolidation),
when a subsidiary is of insignificant importance for a reliable and clear picture of the financial situation of the entire group.

Every consolidated report required to be prepared must be audited by a certified auditor. This means that parent companies of large and medium-sized capital groups and all listed companies are required to undergo an annual consolidated audit.

Consolidated Financial Statements – Frequently Asked Questions

What is a Consolidated Financial Statement?

A consolidated financial statement is a financial document presenting the assets, financial situation and operating result of the entire capital group as if it were a single economic entity.

A group of companies typically consists of a parent company and its subsidiaries, jointly controlled entities, or associates. The purpose of consolidation is to eliminate the effects of interconnectedness between group companies – such as mutual receivables, payables, and sales of goods or services – so that only actual transactions with external entities are reported.

In practice, consolidated financial statements include:

Consolidated balance sheet (statement of financial position),
Consolidated profit and loss account,
Consolidated statement of cash flows,
Consolidated statement of changes in equity,
and additional information containing, among others, a description of the accounting principles used in consolidation.

Consolidated financial statements are prepared based on the individual data of all companies belonging to the group, using methods such as full consolidation, proportionate consolidation or the equity method – depending on the type of relationship between the parent company and other entities.

How Does an Individual Audit Differ from a Consolidated Audit?

An individual audit involves assessing the reliability and accuracy of a single company's financial statements. The auditor focuses on verifying whether the data presented in the balance sheet, profit and loss statement, cash flow statement, and other report elements accurately reflect the assets, financial position, and financial performance of that single entity.

An individual audit verifies, among other things:

correct valuation of assets and liabilities,
compliance of financial operations with legal provisions,
the validity of the adopted accounting principles,
risks of material misstatements.

The audit of consolidated financial statements, however, covers the entire capital group, consisting of the parent company and its subsidiaries, jointly controlled entities, and associates. It is a much more complex process that requires:

Elimination of intra-group transactions – mutual receivables, liabilities, revenues and costs between group companies should be removed from consolidation.
Consolidation of equity interests – the parent's investments in subsidiaries must be eliminated or accounted for appropriately.
Currency translations – in the case of foreign companies, it is necessary to translate their reports into the group's presentation currency, in accordance with the relevant accounting principles.
Unification of accounting policies – all entities in the group must apply uniform accounting policies, which often requires adjustments.
Analyses of structural changes – the auditor examines, among others, acquisitions, sales of entities, changes in shareholdings and intra-group restructuring.

Work coordination also plays an important role – local auditors (so-called component auditors) are often involved, whose work must be properly supervised and integrated into the overall audit.

To sum up:

Element	Individual audit	Consolidated audit
Range	Single company	The entire capital group
Elimination of internal transactions	Not applicable	Yes, mandatory
Currency conversions	Rarely (only if the report is prepared in a different currency)	Often necessary
Unification of accounting principles	It concerns one company	Applies to all group units
Coordination of the work of multiple auditors	Rather not	Often yes
Level of complexity	Standard	High

When is a capital group required to prepare consolidated financial statements

The obligation to prepare consolidated financial statements arises from the Accounting Act and applies to capital groups in which the parent entity controls subsidiaries. However, there are exceptions, for example, for small groups that meet certain criteria.

How long does an audit of consolidated financial statements take?

The duration depends on the size and complexity of the group, the number of companies, and the availability of financial data. Typically, the process lasts from several weeks to several months and is planned according to a schedule agreed upon with the client.

Can a consolidated audit be conducted concurrently with individual audits?

Yes, in practice, individual and consolidated audits are often conducted concurrently, with the individual audits serving as the basis for consolidation and subsequent audit of the entire group.

Are foreign companies included in the consolidated audit?

Yes, all subsidiaries, jointly controlled entities, and associates are part of the group, regardless of their country of registration. Foreign financial statements are translated into the group's reporting currency.

What accounting standards apply to consolidated financial statements?

The most common are IFRS/IAS (IFRS), US GAAP, or the Accounting Act. All entities in the group must apply uniform principles, which often requires adjustments.

Why is it worth entrusting a consolidated financial statement audit to a firm with international experience?

Groups operating in multiple countries must coordinate audits across jurisdictions, which requires expertise, a network of contacts, and consistent procedures. International experience guarantees the efficiency and reliability of the entire process.