CA Vinod Jain, B. Com (H), FCA, FCS, FCWA, LLB, DISA Central Council Member, ICAI Mobile: 98110...

CA Vinod Jain, CA Vinod Jain,

B. Com (H), FCA, FCS, FCWA, LLB, DISAB. Com (H), FCA, FCS, FCWA, LLB, DISA

Central Council Member, ICAICentral Council Member, ICAI

Mobile: 98110 40004Mobile: 98110 40004

E mail: [email protected] mail: [email protected]

Northern India Regional Council of Northern India Regional Council of

Institute of Chartered Accountants of India Institute of Chartered Accountants of India

REPORTING REQUIREMENTS REPORTING REQUIREMENTS OTHER THAN CARO,2003OTHER THAN CARO,2003

44thth August 2007 August 2007

DRAFTING OF DRAFTING OF

AUDITORS’ REPORT AUDITORS’ REPORT

Reporting RequirementsReporting Requirements

ReportingReportingRequirementsRequirements

Statutory RequirementsStatutory Requirements

Auditing & AssuranceAuditing & AssuranceStandardsStandards

Statement of QualificationsStatement of Qualificationsin Auditor’s Reportin Auditor’s Report

Statutory RequirementsStatutory Requirements

Statutory RequirementsStatutory RequirementsStatutory RequirementsStatutory Requirements

CompaniesCompaniesActAct

IRDA IRDA RegulationsRegulations

BankingBankingRegulations/RBIRegulations/RBI

ActAct

Others likeOthers likeSCRA, SCRA,

Electricity ActElectricity Act

Statutory Requirements -Statutory Requirements -Companies ActCompanies Act

Companies ActCompanies ActCompanies ActCompanies Act

Section Section 227(1A)227(1A)Section Section 227(1A)227(1A)

Section Section 227(4A)227(4A)Section Section 227(4A)227(4A)

Section Section 227(2)227(2)




Enquiry byAuditor

Report byAuditor

In case of negative findingIn case of negative finding

Statutory Requirements- Statutory Requirements- Companies ActCompanies Act

Loans & AdvancesLoans & Advances - Whether Secured- Whether Secured - Terms & Conditions,- Terms & Conditions, not prejudicialnot prejudicial

Whether Transactions Whether Transactions represented by book represented by book

entries are notentries are notprejudicial prejudicial

In case of CompanyIn case of Companyother than investmentother than investmentor banking Companyor banking Company

- Securities sold below - Securities sold below the purchase price the purchase price

Section Section

227(1A)227(1A)

Companies ActCompanies Act

Statutory Requirements- Statutory Requirements- Companies ActCompanies Act

Whether Loans & Whether Loans & AdvancesAdvances - shown as deposits- shown as deposits

Whether personal Whether personal expenses charged toexpenses charged to

revenue accountrevenue account

Whether cash receivedWhether cash receivedin respect of allotment,in respect of allotment,

if not, whether position in if not, whether position in B/S not misleadingB/S not misleading

Section Section

227(1A)227(1A)


TrueTrue&&

Fair ViewFair View

State State ofof

AffairsAffairs

Statutory Requirements -Statutory Requirements -Companies ActCompanies Act

Section Section

227 (2)227 (2)Companies Companies

ActAct Profit Profit oror

LossLoss

Statutory Requirement-Statutory Requirement-Companies ActCompanies ActHe has obtained He has obtained

necessarynecessaryinformation & information & explanationsexplanations

B/S and P & L A/cB/S and P & L A/cin agreement within agreement with

the books ofthe books ofAccount etc.Account etc.

Proper books of Proper books of account has beenaccount has been

keptkept

Disqualification of Disqualification of director u/sdirector u/s

274(1)(g)274(1)(g)

Report of the Report of the Branch AuditorBranch Auditor

received andreceived andhow dealt withhow dealt with

B/S and P & L A/cB/S and P & L A/ccomply with comply with accounting accounting standardsstandards

Cess payable u/sCess payable u/s441A has been paid, 441A has been paid,

if not, amount not if not, amount not paidpaid

Adverse commentAdverse commentin thick type or in thick type or

italicsitalics

SectionSection227(3)227(3)

Books of Account Books of Account Section 209 of Companies ActSection 209 of Companies Act

Every company shall keep at its Every company shall keep at its registered office proper books registered office proper books

If not at registered office, notice to RoC If not at registered office, notice to RoC within 7 days in From 23AAwithin 7 days in From 23AA

Accrual basis of accounting is mandatoryAccrual basis of accounting is mandatory

Compliance with AccountingCompliance with AccountingStandards - Section 211(3C)Standards - Section 211(3C)

Accounting Standards of accounting Accounting Standards of accounting recommended by ICAI as may be prescribed by recommended by ICAI as may be prescribed by the Central Govt. in consultation with the National the Central Govt. in consultation with the National Advisory Committee on Accounting StandardsAdvisory Committee on Accounting Standards

At present Accounting Standards issued by ICAI At present Accounting Standards issued by ICAI are the Standards referred to in section 211(3C)are the Standards referred to in section 211(3C)

Accrual basis of accounting is mandatoryAccrual basis of accounting is mandatory

Adverse Comments - In thick Adverse Comments - In thick type or italics - Section 227(3)(e)type or italics - Section 227(3)(e)

Observations of Auditor which have any Observations of Auditor which have any adverse effect on the functioning of the adverse effect on the functioning of the company needs to be given in bold or italics. company needs to be given in bold or italics.

No definition of phrase ‘adverse effect on the No definition of phrase ‘adverse effect on the functioningfunctioning of the company’ in theof the company’ in the Companies Companies Act.Act.

Any special comments on matter given in Any special comments on matter given in section 227(1A) may be given in bold or section 227(1A) may be given in bold or italicsitalics..

Disqualification of Directors - Disqualification of Directors - type or italics - Section 227(3)(f)type or italics - Section 227(3)(f)

Whether any director is disqualified from being Whether any director is disqualified from being appointed as a director under section 274(1)(g).appointed as a director under section 274(1)(g).

Disqualification to be considered Disqualification to be considered ONLYONLY at at Balance Sheet date.Balance Sheet date.

Not applicable where directors are directors in Not applicable where directors are directors in PVT. LTD. Companies PVT. LTD. Companies ONLYONLY

Auditor should obtain a written representation Auditor should obtain a written representation form the Company as well as Directors.form the Company as well as Directors.

Cess Payable Cess Payable Section 441A of Companies ActSection 441A of Companies Act

Whether the Cess payable u/s 441A has Whether the Cess payable u/s 441A has been paid and if not, the details of amount been paid and if not, the details of amount of Cess not so paid has to be reported by of Cess not so paid has to be reported by the Auditor.the Auditor.

No Rules promulgated so far by the No Rules promulgated so far by the Central Govt. in relation to CessCentral Govt. in relation to Cess

Statutory Requirements - Statutory Requirements - Companies ActCompanies Act

Section Section 227(4A)227(4A)


Companies(Auditor’s Report)

Order, 2003

Auditing & Assurance Auditing & Assurance StandardsStandards

AAS - 28AAS - 28The Auditor’sThe Auditor’s

Report on Report on Financial Financial

StatementsStatements

Report should state thatReport should state thatFinancial Statements Financial Statements

are the responsibility ofare the responsibility ofthe entity’s managementthe entity’s management

Report should describe Report should describe the scope of the audit the scope of the audit stating that audit wasstating that audit was

conducted in accordance conducted in accordance with auditing standardswith auditing standards





Report should include aReport should include astatement that audit wasstatement that audit wasplanned and performed toplanned and performed toobtain reasonable assuranceobtain reasonable assurancewhether financial statementswhether financial statementsare free of material misstatementare free of material misstatement

Report should include a Report should include a statement that the audit providesstatement that the audit providesa reasonable basis for his a reasonable basis for his opinionopinion





Report should clearly indicate Report should clearly indicate the financial reporting frameworkthe financial reporting frameworkused to prepare the financialused to prepare the financialstatements and state thestatements and state theopinion on true and fair view.opinion on true and fair view.

Report should describe the Report should describe the limitation on the scope oflimitation on the scope ofAuditor’s work which leads to a Auditor’s work which leads to a Modified OpinionModified Opinion


AAS – 28AAS – 28LimitationLimitation

on on ScopeScope

Limitation Limitation imposed byimposed by

entityentity

Limitation Limitation imposed byimposed by

circumstancescircumstances

Where any “limitation on scope” requires expression of a qualified opinion or disclaimer of opinion, the auditor should:

• describe the limitation, and

• indicate the possible adjustments to financial statements that might have been determined to be necessary had the limitation not existed.


Limitation on Scope Limitation on Scope Qualified OpinionQualified Opinion

“We did not observe the counting of the physical inventories as at 31st March, 2005 since that date was prior to the time we were appointed auditors of XYZ Ltd. Owing to the nature of the entity’s records, we were unable to satisfy ourselves as to inventory quantities by other audit procedures.

In our opinion and to the best of our information and according to the explanations given to us, subject to the effects of such adjustments, if any, as might have been determined to be necessary had we been able to satisfy ourselves as to physical inventory quantities, the financial statements give a true and fair view……….”


Limitation on Scope Limitation on Scope Disclaimer of OpinionDisclaimer of Opinion

“…………

We were not able to observe all physical inventories and confirm account receivable due to limitations placed on the scope of our work by the entity.

Because of the significance of the matters discussed in the preceding paragraph, we do not express an opinion on the financial statements.”


AAS – 28AAS – 28

DisagreementDisagreement

with with

ManagementManagement

InappropriateInappropriateAccountingAccounting

MethodMethod

InadequateInadequateDisclosuresDisclosures

DisagreementDisagreementon Accountingon Accounting

PoliciesPolicies


“As stated in Note X of schedule …. to the financial statements, hire purchase sales have been treated as outright sales by the entity and contrary to accepted accounting practice, the entire profit thereon has been taken into account. This has resulted in the profit for the year, inventories and reserve and surplus being overstated by Rs…..

In our opinion and to the best of our information and according to the explanations given to us, subject to the effect on the financial statements of the mater referred to in the preceding paragraph, the financial statements give a true & fair view.”

Disagreement on Accounting Policies - Disagreement on Accounting Policies - Inappropriate Accounting Method - Qualified OpinionInappropriate Accounting Method - Qualified Opinion


“On 20th December, 2004, ABC Ltd.issued debentures worth Rs. 50 crores for the purpose of financing plant expansion. The debentures agreement restricts the payment of future cash dividends to earnings after 31st March, 2007. In our opinion, disclosure of this information is required by……

In our opinion and to the best of our information and according to the explanations given to us, subject to the omission of the information included in the preceding paragraph, the financial statements give a true and fair view…..”

Disagreement on Accounting Policies - Disagreement on Accounting Policies - Inadequate Disclosure - Qualified OpinionInadequate Disclosure - Qualified Opinion

Auditing & Assurance Auditing & Assurance StandardsStandards- Other Important - Other Important RequirementsRequirements

As per AAS – 28, an auditor report should :As per AAS – 28, an auditor report should :

- bear an appropriate - bear an appropriate titletitle

- be appropriately - be appropriately addressedaddressed (usually (usually to the appointing authority) to the appointing authority)

- bear the - bear the datedate on which the report on which the report expressing opinion is expressed expressing opinion is expressed

- bear - bear name specific locationname specific location, where , where the report has been signed the report has been signed

Auditing & Assurance Auditing & Assurance StandardsStandards- Other Important - Other Important RequirementsRequirements

- - signed by auditor in signed by auditor in personal namepersonal name

- in case of - in case of firm's appointmentfirm's appointment, sign to , sign to

be in be in personal name of the auditorpersonal name of the auditor

and in the and in the name of the firmname of the firm

- mandatory to mention - mandatory to mention Membership Membership

No. No.

Qualification in Auditor’s Qualification in Auditor’s ReportReport

In case opinion is other than unqualified, following In case opinion is other than unqualified, following to be included in the report:to be included in the report:

• Clear Clear description description of all the substantive of all the substantive reasons for such opinionreasons for such opinion

• Quantification Quantification of all possible effects of all possible effects individuallyindividually and in and in aggregateaggregate, on the financial , on the financial statements, unless impracticable to do sostatements, unless impracticable to do so

Note:Note: Any Any modificationsmodifications are to form part of the are to form part of the main bodymain body of the report of the report


Subject matter of QualificationSubject matter of Qualification

NOT SO MATERIALNOT SO MATERIAL to affect the to affect the

truth and fairness truth and fairness of whole of accountsof whole of accounts

SO MATERIALSO MATERIAL that affects the overallthat affects the overall

truth and fairness truth and fairness

It is appropriateIt is appropriate for the Auditor to express true for the Auditor to express true and fair view SUBJECT to the qualificationsand fair view SUBJECT to the qualifications

It would not be appropriateIt would not be appropriate for the Auditor to for the Auditor to express true and fair view SUBJECT to the express true and fair view SUBJECT to the

qualificationsqualifications


MATERIALITYMATERIALITY

NOT SO MATERIALNOT SO MATERIAL to affect the to affect the

truth and fairness truth and fairness of whole of accountsof whole of accounts

SO MATERIALSO MATERIAL that affects the overallthat affects the overall

truth and fairness truth and fairness

Issue Audit Report SUBJECT Issue Audit Report SUBJECT to qualificationsto qualifications

Either Adverse Opinion OREither Adverse Opinion ORDisclaimer of OpinionDisclaimer of Opinion

Information is Information is MaterialMaterial

IF

Its Misstatement (I.e. Omission or Its Misstatement (I.e. Omission or Erroneous Statement)Erroneous Statement)

Could influence the economic decisionsCould influence the economic decisionsof users, taken on the basis of the of users, taken on the basis of the

Financial InformationFinancial Information

AUDITING & ASSURANCE STANDARD - 13AUDITING & ASSURANCE STANDARD - 13AUDIT MATERIALITYAUDIT MATERIALITY

Don’ts in relation to Don’ts in relation to Qualification Qualification in Auditor’s Reportin Auditor’s Report

Qualifying Report by reference to a report made inQualifying Report by reference to a report made in

an earlier year because all the shareholders may an earlier year because all the shareholders may

not have access to such reports.not have access to such reports.

““The position of advance to M/s PQ Ltd. to Rs. 5The position of advance to M/s PQ Ltd. to Rs. 5

crores remain the same as explained in our lastcrores remain the same as explained in our last

Report.”Report.”


Vague statements, the effect of which upon the Vague statements, the effect of which upon the

accounts is not ascertainableaccounts is not ascertainable

““The debit balances are subject to confirmation”The debit balances are subject to confirmation”

OROR

““We have accepted the certificate signed by the We have accepted the certificate signed by the

Managing Director that stocks are realisable at the Managing Director that stocks are realisable at the

Value stated in the balance sheet.”Value stated in the balance sheet.”


Qualification in the Report which do not containQualification in the Report which do not contain any real objection on the part of the Auditor.any real objection on the part of the Auditor.

““No provision for taxation has been made in viewNo provision for taxation has been made in view

of the net loss shown in the profit & loss account.”of the net loss shown in the profit & loss account.”

OROR

““No depreciation has been provided as the factory No depreciation has been provided as the factory

has not yet gone into productionhas not yet gone into production.”.”

The above statements are statements of facts onlyThe above statements are statements of facts only

and may be given in notes to accounts.and may be given in notes to accounts.

QUALIFICATIONS IN QUALIFICATIONS IN AUDITOR’S REPORTAUDITOR’S REPORT

ofof

CORPORATE INDIACORPORATE INDIA

DABUR INDIA LIMITED 2004-2005DABUR INDIA LIMITED 2004-2005AUDITORS: G. BASU & CO.AUDITORS: G. BASU & CO.Notes to Accounts - Schedule P (Note B4)Notes to Accounts - Schedule P (Note B4)

““The Company’s investments in the joint venture, M/s The Company’s investments in the joint venture, M/s Dabon International Pvt. Ltd. have not been accounted Dabon International Pvt. Ltd. have not been accounted for in accordance with AS-27 as the same is being held for in accordance with AS-27 as the same is being held for disposal in the foreseeable future. Consequently, no for disposal in the foreseeable future. Consequently, no provision is deemed necessary for diminution in the provision is deemed necessary for diminution in the value of investments under AS-13.”value of investments under AS-13.”

Auditor’s ReportAuditor’s Report

“…“….subject to Note No. B(4) in Schedule P , Balance .subject to Note No. B(4) in Schedule P , Balance Sheet and Profit & Loss Account have been prepared in Sheet and Profit & Loss Account have been prepared in due compliances of Accounting Standards referred to in due compliances of Accounting Standards referred to in sub section (3C) of Section 211 of Companies Act, sub section (3C) of Section 211 of Companies Act, 1956.”1956.”

SALORA INTERNATIONAL LTD 2004-2005SALORA INTERNATIONAL LTD 2004-2005

AUDITORS: K. PRASAD & COMPANYAUDITORS: K. PRASAD & COMPANYNotes to Accounts - Schedule U (Note No. 7)Notes to Accounts - Schedule U (Note No. 7)

““The process for ascertainment of impairment of assets The process for ascertainment of impairment of assets pursuant to AS-28 which is applicable first time w.e.f. pursuant to AS-28 which is applicable first time w.e.f. 1.4.2004 is underway. This being the first year and process 1.4.2004 is underway. This being the first year and process requires a lot of exercise and technical evaluation to arrive requires a lot of exercise and technical evaluation to arrive at conclusion as to which asset that may be impaired. No at conclusion as to which asset that may be impaired. No effect has been given for impairment loss, in the accounts effect has been given for impairment loss, in the accounts which will not be material according to view of technical which will not be material according to view of technical experts and management also.”experts and management also.”


“…“….In our opinion the Balance Sheet, Profit & Loss .In our opinion the Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with by this report Account and Cash Flow Statement dealt with by this report comply with accounting Standards as referred to in sub comply with accounting Standards as referred to in sub section (3C) of Section 211 of Companies Act, 1956 except section (3C) of Section 211 of Companies Act, 1956 except of AS-28 of Impairment of Assets as given in Note No. 7 in of AS-28 of Impairment of Assets as given in Note No. 7 in Schedule U of Notes to Account.”Schedule U of Notes to Account.”

ASSAM COTTON MILLS LTD 2004-2005ASSAM COTTON MILLS LTD 2004-2005

AUDITORS: SINGHI & CO.AUDITORS: SINGHI & CO.

Notes to Accounts - Schedule 14 [Note No. IIA Notes to Accounts - Schedule 14 [Note No. IIA (viii)](viii)]

““The Company has not provided interest of Rs. The Company has not provided interest of Rs. 510000/- (till date Rs. 1050000/-) on loan taken 510000/- (till date Rs. 1050000/-) on loan taken from its holding company, Kesoram Industries from its holding company, Kesoram Industries Ltd. for the year ended 31st March, 2005.”Ltd. for the year ended 31st March, 2005.”

ASSAM COTTON MILLS LTD 2004-2005ASSAM COTTON MILLS LTD 2004-2005

AUDITORS: SINGHI & CO.AUDITORS: SINGHI & CO.Auditor’s ReportAuditor’s Report

“…“….Attention is invited to Note No. IIA(viii) of Schedule 14 .Attention is invited to Note No. IIA(viii) of Schedule 14 of Note on Accounts regarding non provision of interest of Note on Accounts regarding non provision of interest amounting to Rs. 1050000/- upto 31st March, 2005 (for the amounting to Rs. 1050000/- upto 31st March, 2005 (for the year Rs. 510000/-) on loan taken from Kesoram Industries year Rs. 510000/-) on loan taken from Kesoram Industries Ltd., had the provision been made in the accounts, loss for Ltd., had the provision been made in the accounts, loss for the year would have been Rs. 2771967/- (as against Rs. the year would have been Rs. 2771967/- (as against Rs. 1721967/- shown in the accounts) debit balance in the 1721967/- shown in the accounts) debit balance in the Profit & Loss Account would have been Rs. 11767705/- (as Profit & Loss Account would have been Rs. 11767705/- (as against Rs. 10717705/- shown in the accounts) and interest against Rs. 10717705/- shown in the accounts) and interest accrued and due would have been Rs. 1055688/- (as accrued and due would have been Rs. 1055688/- (as against Rs. 5688/- shown in the accounts) .”against Rs. 5688/- shown in the accounts) .”

We report that in our opinion and to the best of our We report that in our opinion and to the best of our information and according to the explanations given to us, information and according to the explanations given to us, the said accounts subject to para ------above, give the the said accounts subject to para ------above, give the information……………………………………….information……………………………………….

JADOONET LTD. 2004-2005JADOONET LTD. 2004-2005AUDITORS: S.S. KOTHARI & COMPANYAUDITORS: S.S. KOTHARI & COMPANY

Notes to Accounts - Schedule P (Note No. 4)Notes to Accounts - Schedule P (Note No. 4)

““Valuation in respect of accessories has been madeValuation in respect of accessories has been made

based solely on management estimates, since, nobased solely on management estimates, since, no

active market exists for such inventory.”active market exists for such inventory.”


““In view of the absence of active market of inventory,In view of the absence of active market of inventory,

the valuation of the inventories has solely beenthe valuation of the inventories has solely been

made on the management estimates and hence made on the management estimates and hence

we are unable to verify its responsibility we are unable to verify its responsibility

(refer to Note 4 of Schedule P).”(refer to Note 4 of Schedule P).”

Reporting Considerations

When the Principal Auditor Concludes:

1. that work of another can’t be used, and

2. Principal auditor couldn’t perform sufficient additional procedures of the work audited by another auditor,

a qualified or disclaimer of opinion should be given.

AUDITING & ASSURANCE STANDARD - 10AUDITING & ASSURANCE STANDARD - 10

USING WORK Of ANOTHER AUDITORUSING WORK Of ANOTHER AUDITOR

Reporting Considerations & Inclusions:

1. Strict compliance with “Code of Ethics” issued by the ICAI

2. Status of Accountant – whether independent?

3. Title: Accountants’ Report on compilation of

Unaudited Financial statements”

(and not Auditors’ Report)

4. Addressee – Appointing Authority

5. Identification of financial information indicating it is provided by

the management

AUDITING & ASSURANCE STANDARD – 31AUDITING & ASSURANCE STANDARD – 31

ENGAGEMENTS TO COMPILE FINANCIAL INFORMATIONENGAGEMENTS TO COMPILE FINANCIAL INFORMATION

6. Management responsibility as to:

- completeness & accuracy of data

- maintaining adequate books of accounts & internal control

- compliance to applicable laws in preparation & presentation of financial information

- establishing controls to safeguard the assets

7. Compliance with Auditing & Assurance Standards in engagement

8. Material non- compliances with Accounting Standards to which management disagrees (during normal course of engagement)



9. Statement that neither an audit nor review has been

made

10. Material departure from identified reporting framework, if

any

11. Date of Report / Place of Signature / Accountant’s

Signature

12. Client to be asked to sign statement of accounts on face

of it

13. Report so compiled to NOT to be prepared on letterhead – else liable for misinterpretation as assurance

14. Fees NOT to be defined as Auditors’ Fee




Note: On same lines as AAS – 31 including following Statements:

1. Procedures performed were those agreed- upon with the recipient

2. Identification of the purpose for which such procedures were performed

3. A listing of specific procedures performed

4. That had the auditor performed additional procedures, audit or review, matters which came to light would have been reported


ENGAGEMENTS TO PERFORM AGREED UPONENGAGEMENTS TO PERFORM AGREED UPONPROCEDURES REGARDING FINANCIAL INFORMATIONPROCEDURES REGARDING FINANCIAL INFORMATION


Note: On same lines as AAS – 32 including following Statements:

5. Report is restricted to parties who agreed upon the procedures

6. Where applicable, that the report relates to only elements, accounts, items and information agreed upon and not the entire financial statements


ENGAGEMENTS TO PERFORM AGREED UPONENGAGEMENTS TO PERFORM AGREED UPONPROCEDURES REGARDING FINANCIAL INFORMATIONPROCEDURES REGARDING FINANCIAL INFORMATION

Reporting Considerations & Inclusions:1. Opening / Introductory Paragraph including:

- Identification of Financial Statements

- Management & Auditor responsibility Statement

2. Scope Paragraph – Statement w.r.t.:

- Reference to AAS – 33 and relevant laws & regulations

- Review being limited to inquiries & analytical procedures

- Procedures provide less assurance than audit

AUDITING & ASSURANCE STANDARD – 33AUDITING & ASSURANCE STANDARD – 33ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTSENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

Reporting Considerations & Inclusions:3. Negative Assurance I.e., the auditor’s review did not lead

to the believing that financial statements do not give true and fair view

4. Matters that impair true and fair view, and if possible quantifications thereof

5. Material Scope on limitations, if any

6. Date of report not to be earlier than date on which financial statements signed or approved by management

AUDITING & ASSURANCE STANDARD – 33AUDITING & ASSURANCE STANDARD – 33ENGAGEMENTS TO REVIEW FINANCIAL STATEMENTSENGAGEMENTS TO REVIEW FINANCIAL STATEMENTS

AUDITING & ASSURANCE STANDARD - 35AUDITING & ASSURANCE STANDARD - 35EXAMINATION OF PROSPECTIVE FINANCIAL EXAMINATION OF PROSPECTIVE FINANCIAL

INFORMATIONINFORMATION

Auditors Report to include:Auditors Report to include:

Reference to the Reference to the intended purpose/use intended purpose/use and/or restricted and/or restricted distribution of prospective financial information.distribution of prospective financial information.

Statement that examination included examination of evidence Statement that examination included examination of evidence supporting assumptions, amounts & other disclosures.supporting assumptions, amounts & other disclosures.

Negative assurance that whether Negative assurance that whether assumptions provide assumptions provide reasonable basisreasonable basis for prospective financial information. for prospective financial information.

OpinionOpinion as to whether prospective financial information is as to whether prospective financial information is properly prepared on basis of assumptions and presented in properly prepared on basis of assumptions and presented in accordance with relevant financial reporting framework.accordance with relevant financial reporting framework.

Appropriate Appropriate caveatscaveats concerning achievability of prospective concerning achievability of prospective results.results.

Statement that actual results are likely to be different from Statement that actual results are likely to be different from prospective financial information and prospective financial information and variationvariation could be material. could be material.

In case of Projection, a statement that prospective financial In case of Projection, a statement that prospective financial information has been prepared using set of assumptions that information has been prepared using set of assumptions that include hypothetical assumptions about future events and include hypothetical assumptions about future events and management actions that not necessarily occur.management actions that not necessarily occur.

AUDITING & ASSURANCE STANDARD - 35AUDITING & ASSURANCE STANDARD - 35EXAMINATION OF PROSPECTIVE FINANCIAL EXAMINATION OF PROSPECTIVE FINANCIAL

INFORMATIONINFORMATION

Guidance Note onGuidance Note on Auditor’s Report on Auditor’s Report on Revised Accounts of Companies beforeRevised Accounts of Companies beforeCirculation to ShareholdersCirculation to Shareholders

Whether :Whether :

1.1. All copies of the All copies of the original accountsoriginal accounts are are returned returned to the auditor?to the auditor?

2.2. Adequate disclosureAdequate disclosure of the fact of of the fact of revisionrevision on the on theaccounts already approved by the Board & accounts already approved by the Board & reported by the Auditor appears as a specific reported by the Auditor appears as a specific note or not?note or not?

YES NO

No further disclosure is

required in the Report

Refer the fact of revision

in the Report

Reporting Considerations:Reporting Considerations:

1.1. SSpecific elements, accounts or items considered.pecific elements, accounts or items considered.

2.2. Manner of conducting the auditManner of conducting the audit

3.3. Limitations on scope, if any, to be mentionedLimitations on scope, if any, to be mentioned

4.4. Assumptions made, to be statedAssumptions made, to be stated

5.5. Reference to specific information or explanations Reference to specific information or explanations relied uponrelied upon

6.6. Title, whether certificate or report, to be clearly Title, whether certificate or report, to be clearly indicatedindicated

7.7. Choice of appropriate words whether an opinion or Choice of appropriate words whether an opinion or confirmation has been madeconfirmation has been made

Guidance Note onGuidance Note on Audit Reports and Audit Reports and Certificates for Special PurposesCertificates for Special Purposes

8.8. Reference to general purpose financial statements, if Reference to general purpose financial statements, if relied uponrelied upon

9.9. In case of interpretation of statute, auditor to mention In case of interpretation of statute, auditor to mention that an opinion has been expressed.that an opinion has been expressed.

10.10. Report / Certificate to be a self contained document Report / Certificate to be a self contained document

11.11. Extent of responsibility assumedExtent of responsibility assumed

12.12. In case of audited financial statements, auditor to In case of audited financial statements, auditor to indicate indicate

- - Figures from audited general purpose statement has Figures from audited general purpose statement has been usedbeen used

- Reconciliation of figures between general purpose - Reconciliation of figures between general purpose financial statement and his report/certificate.financial statement and his report/certificate.

Guidance Note onGuidance Note on Audit Reports and Audit Reports and Certificates for Special PurposesCertificates for Special Purposes

Guidance Note on Guidance Note on Profit Forecasts and / or Profit Forecasts and / or Financial ForecastsFinancial Forecasts

Accountants’ Report - Inclusions

Sources of Information

Basis of Forecasts

AssumptionsMade

NOTE: Accountant not to give any impression as if vouching for accuracy of forecasts

Addressed toAddressed toBoard, unlessBoard, unless

circumstances circumstances RequireRequire

otherwiseotherwise

Specify Specify Limitation of Limitation of Scope, if anyScope, if any

Accountants’Accountants’Report -Report -

RequisitionsRequisitions

Specify Specify Nature, Scope,Nature, Scope, and Objectivesand Objectives

as agreedas agreed

Qualification in Qualification in report on:report on:1. Disagreement 1. Disagreement With ManagementWith Management2. Material 2. Material ReservationReservation

Forewarning Forewarning Signals, if any,Signals, if any,

For profitFor profitforecastsforecasts

Guidance Note on Guidance Note on Profit Forecasts and / or Profit Forecasts and / or Financial ForecastsFinancial Forecasts

Guidance Note on Guidance Note on Reports in Company Reports in Company ProspectusesProspectuses

S.No Issue / Query Answer

1.1. Eligibility to Eligibility to make Reportmake Report

Statutory Auditor / Joint Statutory Auditor / Joint Auditors considering Auditors considering Sec. 226(3)Sec. 226(3)

2.2. Signing of the Signing of the ReportReport

As per AAS – 28As per AAS – 28

3.3. Addressee of the Addressee of the ReportReport

Board of directorsBoard of directors

Auditor’s Report - Auditor’s Report - InclusionsInclusions

1.1. Figures of profit & loss for the preceding 5 years or actual Figures of profit & loss for the preceding 5 years or actual whichever is higherwhichever is higher

2.2. Statement of assets and liabilities as on last date of latest Statement of assets and liabilities as on last date of latest financial yearfinancial year

3.3. The rates of dividends, if any, paid in respect of each class of The rates of dividends, if any, paid in respect of each class of shares for each of 5 preceding years.shares for each of 5 preceding years.

4.4. Disclosure in form of note for adjustments to assets, liabilities, Disclosure in form of note for adjustments to assets, liabilities, profit & loss dealt with by the report profit & loss dealt with by the report OROR Making of adjustments Making of adjustments & indication thereof& indication thereof

5.5. Fact if any part of accounts for five years before three months Fact if any part of accounts for five years before three months from date of issue being incomplete.from date of issue being incomplete.

In such a case, accounts upto a date not earlier than six In such a case, accounts upto a date not earlier than six months from date of issue to be includedmonths from date of issue to be included

Guidance Note on Guidance Note on Reports in Company Reports in Company ProspectusesProspectuses

DRAFTING OFDRAFTING OF

NOTES TO ACCOUNTSNOTES TO ACCOUNTS

Issues:

Notes to Accounts – What to include?Notes to Accounts – What to include?

Accounting Policies – Accounting Standards (AS) 1Accounting Policies – Accounting Standards (AS) 1

Disclosure under various Accounting StandardsDisclosure under various Accounting Standards

Changes in Accounting Policies, financial impactChanges in Accounting Policies, financial impact

Unusual Items / transactionsUnusual Items / transactions

Prior period itemsPrior period items

Auditing & Assurance Standards –16 Going Auditing & Assurance Standards –16 Going Concern Concern

DRAFTING OF NOTES TO ACCOUNTSDRAFTING OF NOTES TO ACCOUNTS

CA Vinod JainCA Vinod Jain

B.Com(H),FCA, FCS, FCWA, LLB, DISAB.Com(H),FCA, FCS, FCWA, LLB, DISA

Central Council Member, ICAICentral Council Member, ICAI

Mobile: 98110 40004Mobile: 98110 40004

Email: [email protected]: [email protected]

CA Vinod Jain, B. Com (H), FCA, FCS, FCWA, LLB, DISA Central Council Member, ICAI Mobile: 98110...

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Transcript of CA Vinod Jain, B. Com (H), FCA, FCS, FCWA, LLB, DISA Central Council Member, ICAI Mobile: 98110...