Auditor’s Powers, Duties and Responsibilities
Under the Companies Act, 2013
CA. (Dr.) Gurmeet S. Grewal
B. Com (Hons.), FCA, PhD., CAL (IIAM)
Grewal & Singh
Chartered Accountants
Phones: 09811242856 & 09266942856
Email: ca.grewalgurmeet@gmail.com
cagsgrewal@gmail.com
gsgrewal@cagrewalsingh.com
Reporting by the Company Auditors
For Financial Years starting on or after April 1,
2014
• Section 143 of the Companies Act, 2013,
• The Companies (Audit and Auditors) Rules,
2014, and
• CARO, 2015 would be applicable.
CA. (Dr.) G.S. Grewal
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Section 143(1) of the Companies Act, 2013
Every auditor of a company shall
• have a right of access at all times to the books of
account and vouchers of the company,
• whether kept at the registered office of the company
or at any other place, and
• shall be entitled to require from the officers of the
company such information and explanation as he
may consider necessary for the performance of his
duties as auditor, and
• amongst other matters inquire into the following
matters, namely:—
CA. (Dr.) G.S. Grewal
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Scheme of Section 143
Sub – section (1) - Auditor is to make enquiries on six
matters stated in the sub-section.
Sub-section (2) & (3)– Auditor to report to the members
on specified matters.
Sub-section (3) – Auditors Report to state on other
matters ( as may be prescribed in Rules).
Sub-section (11) – Central Government’s power to ask
auditors to report on specified matters.
Sub-section (12) – Reporting of fraud by auditors.
CA. (Dr.) G.S. Grewal
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Section 143(1)
Auditor is to make enquiries on following six matters:
(a) Whether loans and advances made by the company on
the basis of security have been properly secured; and
whether the terms on which they have been made are
prejudicial to the interest of the company or its
members;
(b) Whether transactions of the company which are
represented merely by book entries are prejudicial to
the interest of the company;
(c) Whether the company not being an investment
company or a banking company whether so much of
the assets of the company as consists of shares,
debentures and other securities have been sold at a
price less than that at which they were purchased by
the company;
CA. (Dr.) G.S. Grewal
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Section 143(1)
(d)
Whether loans and advances made by the company
shown by the company as deposits;
(e) Whether personal expenses have been debited to
revenue account;
(f) Whether it is stated in the books and documents the
company that any shares have been allotted for
cash, whether cash has been actually received in
respect of such allotment, and if no cash has been
so received, whether the position as stated in the
accounts books and the balance sheet is correct,
regular and not misleading.
The auditor of the holding company has the right of access
to the records of all its subsidiary companies insofar as it
relates to the consolidation of its financial statements with
that of its subsidiaries.
CA. (Dr.) G.S. Grewal
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Section 143(2)
The auditor shall make a report :
• on the accounts examined by him and
• on every financial statements which are
required to be laid before the General
Meeting of the company.
CA. (Dr.) G.S. Grewal
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Financial Statement
Section 2(40) defines ‘Financial Statement’ to include:
• Balance Sheet
• Profit and Loss Account
• Cash Flow Statement
• Statement of Changes in Equity, if applicable
• Explanatory Notes
Cash Flow Statement is not to be prepared by:
• One Person Company;
• Small Company; and
• Dormant Company.
CA. (Dr.) G.S. Grewal
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Small Company
Section 2(85) ‘‘small company’’ means a company, other
than a public company,—
(i) paid-up share capital of which does not exceed fifty
lakh rupees or such higher amount as may be prescribed
which shall not be more than five crore rupees; and
(ii) turnover of which as per its last profit and loss account
does not exceed two crore rupees or such higher amount
as may be prescribed which shall not be more than
twenty crore rupees:
Provided that nothing in this clause shall apply to—
(A) a holding company or a subsidiary company;
(B) a company registered under section 8; or
(C) a company or body corporate governed by any
special Act;
CA. (Dr.) G.S. Grewal
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Section 129(1)
Requirements as to Financial Statement
• Financial Statements shall give true and fair view of
the state of affairs of the company.
• Financial Statements shall comply with the
accounting standards notified under section 133.
• Financial Statements shall be in the form prescribed
in Schedule III of the Act.
• At every AGM of a company, the BOD shall lay before
such meeting Financial Statements for the financial
year.
CA. (Dr.) G.S. Grewal
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Applicability of Accounting Standards
and Standards on Auditing
Accounting Standards
Accounting Standards are notified under Section 133 of
the Act.
28 Accounting Standards (all except AS 8, since
withdrawn by ICAI) are notified.
AS 30 to 32, are not notified.
Auditor has to state in his report whether accounting
standards have been complied with. [143(3)(e)]
Standards on Auditing
Standards on Auditing, issued by ICAI, are to be
followed in the audit process. [Section 143(2)]
CA. (Dr.) G.S. Grewal
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Section 129(3) – Consolidated Financial
Statements
A company having one or more subsidiaries is to
prepare a Consolidated Financial Statements (CFS).
‘Subsidiary’ for the purpose of this clause includes
‘Associates’ and ‘Joint Venture’.
CFS is in addition to stand alone financial statement.
Stand alone Financial Statement to include a Statement
containing salient features of Financial Statement of
subsidiaries in Form AOC-1.
As per Rule 6 - CFS are to be prepared as per Schedule
III and applicable Accounting Standards.
CA. (Dr.) G.S. Grewal
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Section -143(2)
The Auditor’s Report shall, after
• taking into account the provisions of the Act and
Rules,
• the accounting and auditing standards and
• matters which are required to be included in the
audit report,
state whether to the best of his information and
knowledge, the said financial statements, give a true and
fair view of the state of affairs of the company as at the
end of its financial year and profit or loss and cash flow
for the year.
CA. (Dr.) G.S. Grewal
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Section 143(3)(a)
The Auditor's Report shall also state:
• whether he has sought and obtained all the
information and explanations
• which to the best of his knowledge and belief were
necessary for the purpose of his audit and
if not, the details thereof and the effect of such
information on the financial statements;
CA. (Dr.) G.S. Grewal
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Section 143(3)(b)
The Auditor's Report shall also state:
• whether, in his opinion,
• proper books of account as required by law have
been kept by the company so far as appear from
his examination of those books and
• proper returns adequate for the purposes of his
audit have been received from branches not visited
by him,
CA. (Dr.) G.S. Grewal
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Section 143(3)(c)
The Auditors’ Report shall also state:
• whether the report on the accounts of any branch
office audited under sub-section (8), by a person
other than the company’s auditor has been sent
to him under the proviso to that sub-section, and
• the manner in which he has dealt with it in
preparing his report?
CA. (Dr.) G.S. Grewal
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Reporting under Section 143(3)(c)
We did not audit the financial statements / information of
….. (number) …… branches included in the standalone
financial statements of the Company whose financial
statements / financial information reflect total assets of
Rs. __________ for the year ended on that date, as
considered in the standalone financial statements. The
financial statements / information of these branches
have been audited by the branch auditors whose reports
have been furnished to us, and our opinion in so far it
relates to the amounts and disclosures included in
respect of these branches, is based solely on the report
of such branch auditors.
Our opinion is not modified in respect of this matter.
CA. (Dr.) G.S. Grewal
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Section 143(3)(d)
The Auditors’ Report shall also state:
whether the company’s balance sheet and profit
and loss account dealt with by the report are in
agreement with the books of account and returns ?
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Section 143(3)(e)
The Auditors’ Report shall also state:
whether, in his opinion, the financial statement
comply with the accounting standards?
CA. (Dr.) G.S. Grewal
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Section 143(3)(f)
The Auditors’ Report shall also state:
the observations or comments of the auditors on
financial transactions or matters which have any
adverse effect on the functioning of the company,
CA. (Dr.) G.S. Grewal
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Guidance Note on Reporting
u/s 143(3)(f) of the Companies Act,2013
• Observations or comments made by the auditor do
not have adverse impact on the working of the
company but they may contain matters which might
have an adverse effect on the functioning of the
company.
• If auditor’s report is modified (qualified, disclaimer or
adverse ) or there is emphasis of matter and that has
any adverse effect on the functioning of the company,
then auditor is required to report under this clause
after applying his professional judgement.
• No reporting will be required if, there are no
modification or no matter of emphasis.
CA. (Dr.) G.S. Grewal
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Examples of Reporting u/s 143(3)(f)
Basis for Qualified Opinion
The Company’s inventories are carried in the Balance
Sheet at Rs. XXX (As at 31st March 20YY: Rs. YYY).
The Management has not stated the inventories at the
lower of cost and net realisable value but has stated
them solely at cost, which constitutes a departure from
the Accounting Standard - 2 “Valuation of Inventories”.
The Company’s records indicate that had the
Management stated the inventories at the lower of cost
and net realisable value, an amount of Rs. XXX (As at
31st March 20YY: Rs. YYY) would have been required
to write the inventories down to their net realisable
value.
Our opinion, in this matter, is modified.
CA. (Dr.) G.S. Grewal
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Examples of Reporting u/s 143(3)(f)
Qualified Opinion
In our opinion and to the best of our information and
according to the explanations given to us, except for the
effects of the matter described in the Basis for Qualified
Opinion paragraph above, the aforesaid standalone
financial statements give the information required by the
Act in the manner so required and give a true and fair
view in conformity with the accounting principles
generally accepted in India, of the state of affairs of the
Company as at 31st March, 20XX, and its profit/loss and
its cash flows for the year ended on that date.
CA. (Dr.) G.S. Grewal
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Examples of Reporting u/s 143(3)(f)
Report on Other Legal and Regulatory Requirements
(f) As required by Section 143 (3) of the Act, we
report that:
The matter described in the Basis for Qualified
Opinion paragraph above, in our opinion, may
have an adverse effect on the functioning of the
Company.
CA. (Dr.) G.S. Grewal
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Examples of Reporting u/s 143(3)(f)
Basis for Qualified Opinion
The company is in violation of section 135 of the
Companies Act, 2013. According to this section, 2% of
the average net profit of preceding 3 years has to be
spent for Corporate Social Responsibility activities. No
such amount has been spent on any such activity by the
company.
Our opinion is qualified in respect of this matter.
CA. (Dr.) G.S. Grewal
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Examples of Reporting u/s 143(3)(f)
Qualified Opinion
In our opinion and to the best of our information and
according to the explanations given to us, except for the
possible effects of the matter described in the Basis for
Qualified Opinion paragraph, the aforesaid standalone
financial statements give the information required by the
Act in the manner so required and give a true and fair
view in conformity with the accounting principles
generally accepted in India of the state of affairs of the
company as at 31st March 2015, and its profit/loss and
its cash flows for the year ended on that date.
Our opinion, in this matter, is modified.
CA. (Dr.) G.S. Grewal
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Examples of Reporting u/s 143(3)(f)
Report on Other Legal and Regulatory Requirements
(f) As required by Section 143 (3) of the Act, we
report that:
The matter described in the Basis for Qualified
Opinion paragraph above, in our opinion, will not
have an adverse effect on the functioning of the
Company.
CA. (Dr.) G.S. Grewal
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Examples of Reporting u/s 143(3)(f)
Basis for Adverse Opinion
The Company’s financing arrangements expired and the
amount outstanding was payable on March 31, 20XX.
The Company has been unable to re-negotiate or obtain
replacement financing and is considering filing for
bankruptcy. These events indicate a material uncertainty
that may cast significant doubt on the Company’s ability
to continue as a going concern and, therefore, it may be
unable to realise its assets and discharge its liabilities in
the normal course of business. The financial statements
(and notes thereto) do not disclose this fact.
Our opinion is modified in respect of this matter.
CA. (Dr.) G.S. Grewal
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Examples of Reporting u/s 143(3)(f)
Adverse Opinion
In our opinion, because of the omission of the
information mentioned in the Basis for Adverse Opinion
paragraph, the financial statements do not give the
information required by the Companies Act, 2013 in the
manner so required and also do not give a true and fair
view in conformity with the accounting principles
generally accepted in India of the state of affairs of the
Company as at 31st March, 20XX, and its profit/loss and
its cash flows for the year ended on that date.
CA. (Dr.) G.S. Grewal
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Examples of Reporting u/s 143(3)(f)
Report on Other Legal and Regulatory Requirements
(f) As required by Section 143 (3) of the Act, we report
that:
The matter described in the Basis for Adverse Opinion
paragraph above, in our opinion, will have an
adverse effect on the functioning of the Company.
CA. (Dr.) G.S. Grewal
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Examples of Reporting u/s 143(3)(f)
Emphasis of Matters
We draw attention to Note Y in the financial statements
which indicates that the Company has accumulated losses
and its net worth has been fully / substantially eroded, the
Company has incurred a net loss/net cash loss during the
current and previous year(s) and, the Company’s current
liabilities exceeded its current assets as at the balance sheet
date. These conditions, along with other matters set forth in
Note Y, indicate the existence of a material uncertainty that
may cast significant doubt about the Company’s ability to
continue as a going concern. However, the financial
statements of the Company have been prepared on a going
concern basis for the reasons stated in the said Note.
Our opinion is not modified in respect of these matters.
CA. (Dr.) G.S. Grewal
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Examples of Reporting u/s 143(3)(f)
Report on Other Legal and Regulatory Requirements
(f) As required by Section 143 (3) of the Act, we report
that:
The going concern matter described in subparagraph (b) under the Emphasis of Matters
paragraph above, in our opinion, may have an
adverse effect on the functioning of the Company.
CA. (Dr.) G.S. Grewal
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Examples of Reporting u/s 143(3)(f)
Emphasis of Matters
We draw attention to Note No. … in the financial statements
which states that the company has stopped its mining
operations on account of exhaustion of clay stock. This
segment of operations made significant contribution to
revenue and profit in the past years. The company has other
operational segments which continue to contribute significant
revenue and profit.
Our opinion is not modified in respect of these matters.
CA. (Dr.) G.S. Grewal
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Emphasis of Matter
Xchanging Solutions Ltd.
We draw attention to Note 32 to the financial statements,
regarding redemption of certain debentures aggregating to Rs.
6,25,00,000, by the company in the year 2007; subsequent order
by the Hon’ble High Court of adjudicature at Madras restraining
the company from reflecting the redemption of debentures and to
continue to show it as due and payable consequent to a petition
filed by a third party; and non-reversal of the aforesaid redemption
of debentures in the books of account of the company pending
admission and disposal of the appeal filed by the company with
the Hon’ble High Court of adjudicature at Madras on July 26,
2011. Depending on the outcome of the Company’s appeal,
significant adjustments may be required to be made and reflected
in the subsequent period financial reporting.
Our opinion is not qualified in this respect.
CA. (Dr.) G.S. Grewal
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Section 143(3)(g)
The auditors’ report shall also state:
whether any director is disqualified from being
appointed as director under sub-section (2) of
section 164 ?
Reporting:
On the basis of written representations received from the
directors as on 31st March, 2015 taken on record by the
Board of Directors, none of the directors is disqualified
as on 31st March, 2015 from being appointed as director
in terms of section 164(2) of the Act.
CA. (Dr.) G.S. Grewal
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Section 143(3)(h)
The auditors’ report shall also state:
any qualification, reservation or adverse remark
relating to the maintenance of accounts and other
matters connected therewith?
CA. (Dr.) G.S. Grewal
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Guidance Note on Reporting u/s 143(3)(h)
of the Companies Act, 2013
• If auditor’s report is modified (qualified, disclaimer
or adverse) and that modification is connected to
or leads to books of accounts and/or financial
statement prepared there from, then auditor is
required to report under this clause.
• No reporting will be required if, there are no
modifications.
• Reporting under ‘Matter of Emphasis’ in terms of
SA-706 shall not trigger reporting under this
clause.
CA. (Dr.) G.S. Grewal
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Example on Reporting u/s 143(3)(h)
Basis for Disclaimer of Opinion
We were appointed auditors of the Company after
March 31, 20X1 and thus could not observe the
counting of physical inventories at the beginning and
end of the year. Accordingly, we were unable to
satisfy ourselves by alternative means concerning
the inventory quantities held at March 31, 20X0 and
March 31, 20X1 which are stated in the Balance
Sheet at Rs. XXX and Rs. XXX, respectively.
CA. (Dr.) G.S. Grewal
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Example on Reporting u/s 143(3)(h)
In addition, the introduction of a new computerised
accounts receivable system in September 20X0
resulted in numerous errors in accounts receivable.
As of the date of our audit report, Management was
still in the process of rectifying the system
deficiencies and correcting the errors. We were
unable to confirm or verify by alternative means
accounts receivable included in the Balance Sheet at
a total amount of Rs. XXX as at March 31, 20X1.
CA. (Dr.) G.S. Grewal
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Example on Reporting u/s 143(3)(h)
As a result of these matters, we were unable to
determine whether any adjustments might have been
found necessary in respect of recorded or unrecorded
inventories and accounts receivable in the Balance
Sheet, and the corresponding elements making up the
Statement of Profit and Loss and Cash Flow Statement.
Opinion
Because of the significance of the matters described in
the Basis for Disclaimer of Opinion paragraph, we have
not been able to obtain sufficient appropriate audit
evidence to provide a basis for an audit opinion.
Accordingly, we do not express an opinion on the
financial statements.
CA. (Dr.) G.S. Grewal
40
Example on Reporting u/s 143(3)(h)
Report on Other Legal and Regulatory Requirements
As required by section 143(3) of the Act, we report that:
(h) The reservation relating to the maintenance of
accounts and other matters connected therewith are
as stated in the Basis for Disclaimer of Opinion
paragraph above.
CA. (Dr.) G.S. Grewal
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Section 143(3)(i)
The Auditor's Report shall also state:
whether the company has adequate internal
financial controls system in place and the
operating effectiveness of such controls;
Reporting under this clause is postponed to be reported
from the financial year beginning April 1, 2015.
CA. (Dr.) G.S. Grewal
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Reporting u/s 143(3)(j)
The Auditor's Report shall also state:
(j) such other matters as may be prescribed.
Rule 11 of the Companies (Audit & Auditors)
Rules, 2014 prescribes three additional matters
on which auditor is to state his views and
comments.
CA. (Dr.) G.S. Grewal
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Additional Reporting as prescribed u/s
143(3)(j) read with Rule 11
(a) whether the company has disclosed the impact, if
any, of pending litigations on its financial position in
its financial statement;
(b) whether the company has made provision, as
required under any law or accounting standards, for
material foreseeable losses, if any, on long term
contracts including derivative contracts; and
(c) whether there has been any delay in transferring
amounts, required to be transferred, to the Investor
Education and Protection Fund by the company.
CA. (Dr.) G.S. Grewal
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Reporting Under Section 143(4)
where any of the matters referred to in this section
is answered in the negative or with a qualification,
the auditor’s report shall state the reason for the
answer.
CA. (Dr.) G.S. Grewal
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Section 143(11)
• The Central Government may, in consultation with the
National Financial Reporting Authority, by general or
special order, direct, in respect of such class or
description, as may be specified in the order, that the
auditor’s report shall also include a statement on
such matters as may be specified therein.
• The Central Government has issued CARO, 2015.
CA. (Dr.) G.S. Grewal
46
CARO, 2015
• Applicability.
• Matters to be included in the Auditor’s Report under
CARO, 2015.
• Guidance on CARO, 2015 by MCA and AASB.
CA. (Dr.) G.S. Grewal
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Applicability of CARO, 2015
Applies to all companies including a foreign company
except:
•
•
•
•
•
•
a banking company,
an insurance company,
a section 8 company,
One Person Company,
Small Company and
Specified private limited company.
CA. (Dr.) G.S. Grewal
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Applicability of CARO, 2015 – Specified
Private Companies
Does not apply to a private limited company with
• a paid up capital and reserves not more than
rupees fifty lakh, and
• which does not have loan outstanding exceeding
rupees twenty lakh from any bank or financial
institution, and
• does not have a turnover exceeding rupees five
crore.
at any time during the financial year.
CA. (Dr.) G.S. Grewal
49
Section 143(12)
“Notwithstanding anything contained in this section, if
an auditor of a company, in the course of the
performance of his duties as auditor, has reason to
believe that an offence involving fraud is being or has
been committed against the company by officers or
employees of the company, he shall immediately
report the matter to the Central Government within
such time and in such manner as may be
prescribed.”
CA. (Dr.) G.S. Grewal
50
CARO, 2015
(xii) whether any fraud on or by the company has
been noticed or reported during the year; If yes,
the nature and the amount involved is to be
indicated.
CA. (Dr.) G.S. Grewal
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Fraud- Explanation to Section 447
“Any act or omission, concealment of the fact or abuse
of position committed by any person himself or by other
person in connivance in any manner, with intent to
deceive, to gain undue advantage from or to injure the
interest of the company or its shareholders or its
creditors or any other person, whether or not there is
any wrongful gain or wrongful loss.”
CA. (Dr.) G.S. Grewal
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Frauds










Revenue Frauds
Tax Frauds
Vendor Frauds
Sales Fraud
Recruitment Fraud
Management Frauds
Understatement of Liabilities
Employee Embezzlements
Excessive Claims by Employees
Investment Scam
CA. (Dr.) G.S. Grewal
Slide 53
Risk Assessment
Risk assessment is important and fast emerging
new professional opportunity especially after
Satyam, Common Wealth Games and Kolkata
Chit Fund, Kingfisher etc.
Risk assessment is important as audit program is
designed after considering the risks involved.
CA. (Dr.) G.S. Grewal
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Reason to Believe and Other Terms
• Suspicion- is a state of mind more than ‘speculation’
but short of ‘knowledge’. It is without sufficient
evidence.
• Reason to Believe- there is sufficient information or
convincing evidence to advance beyond suspicion
that it is possible someone is committing or has
committed a fraud.
• Sufficient Reason to Believe- if on evaluation of all
the available information and applying appropriate
level of skepticism, the conclusion is drawn that fraud
is being or has been committed.
CA. (Dr.) G.S. Grewal
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SA 240 – Auditor’s Responsibilities Relating to
Fraud in an audit of Financial Statements
• It is designed to assist the auditor in identifying and
assessing the risks of material misstatement due to
fraud and in designing procedures to detect such
misstatement.
• It expands on how the following two SAs are to be
applied in relation to risks of material misstatement
due to fraud:
•
SA 315- Identifying and Assessing the Risks of
Material Misstatement through Understanding the
Entity and its Environment.
• SA 330- The Auditor’s Response to Assessed Risks.
• Implementation Guide to Risk Based Audit of Financial
Statements is also available.
CA. (Dr.) G.S. Grewal
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Guidance Note for Reporting on Fraud issued
by ICAI
Notwithstanding anything contained in this section ,if an
auditor of a company
in the course of the performance of his duties
as auditor…
CA. (Dr.) G.S. Grewal
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Guidance Note for Reporting on Fraud issued
by ICAI
“Notwithstanding anything contained in this section,
if an auditor of a company ….
Besides, Statutory Auditor, it includes:
Branch Auditor
Joint Auditor
Cost Auditor
Secretarial Auditor
But, does not include Internal Auditor and Tax Auditor.
CA. (Dr.) G.S. Grewal
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in the course of the performance of his duties
as auditor…
• Attest or non- attest services after April 1, 2014 in
the capacity as auditor of the company
• Audit of Interim Financial Statements
• Limited Review/ Quarterly Financial Result audit
• Tax Audit
• Issue of Certificates
• Though may not be pursuant to any requirement
of the Companies Act, 2013 but shall be construed
as being in the course of performing his duties as
an auditor.
CA. (Dr.) G.S. Grewal
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Guidance Note for Reporting on Fraud issued
by ICAI
Notwithstanding anything contained in this section ,if an
auditor of a company in the course of the performance of
his duties as auditor
has reason to believe….
CA. (Dr.) G.S. Grewal
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Reason to Believe ……. Section 143(12)
Rule – 13 of the Companies (Audit and Auditors),
Rules, 2014
specifies the threshold for reporting as ‘sufficient
reason to believe’ and ‘knowledge’.
CA. (Dr.) G.S. Grewal
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Guidance Note for Reporting on Fraud issued
by ICAI
Notwithstanding anything contained in this section ,if an
auditor of a company in the course of the performance of
his duties as auditor has reason to believe
that an offence involving fraud is being or has
been committed against the company…
Requirement of CARO, 2015 Point XII
whether any fraud on or by the company has
been noticed or reported during the year; If
yes, the nature and the amount involved is to
be indicated.
CA. (Dr.) G.S. Grewal
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Scope of the term “Fraud’
• Will it cover:
• Bribery
• Money Laundering
or/and
Non- compliances with laws.
CA. (Dr.) G.S. Grewal
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Reporting in case of Corruption, Bribery,
Money Laundering and Non – compliance
with Other laws
• The auditor to examine :
• Whether such act or acts have been carried out by
officers or employees of the company; and
• Whether such acts have direct effect on the
company.
• SA 250- Consideration of Laws and Regulations in
an Audit of Financial Statements to be adhered to.
• Para 28 refers to statutory liability to report.
CA. (Dr.) G.S. Grewal
64
Concept of Materiality
• SA 240 – one of the objectives
• To identify and assess the risks of material
misstatement in the financial statements due to
fraud.
• SA 450- ‘Evaluation of Misstatements Identified
During the Audit’ considers the concept of
materiality.
• The Companies (Amendment) Act, 2015 has been
notified.
• Provides for reporting to MCA
specified amount only.
CA. (Dr.) G.S. Grewal
frauds involving
65
Section 143(12) of the Company Act, 2013
Notwithstanding anything contained in this section ,if
an auditor of a company, in the course of the
performance of his duties as auditor has reason to
believe that an offence involving fraud is being or has
been committed against the company
by officers or employees of the company…
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Section 143(12) of the Companies Act, 2013
Notwithstanding anything contained in this section ,if
an auditor of a company, in the course of the
performance of his duties as auditor has reason to
believe that an offence involving fraud is being or has
been committed against the company by officers or
employees of the company,
he shall immediately report the matter to the
Central Government within such time and in
such manner as may be prescribed.
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Procedure of Reporting in Rule 13
• Not to be reported again by the auditor, if
identified and reported by the:
• Cost Auditor
• Secretarial Auditor
• Management through Vigil Mechanism
• To be reported only if he is the first person to
identify/note such fraud in the course of
performance of his duty as auditor
• May be required to ensure that proper steps are
being taken in that regard.
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Companies (Audit and Auditors) Rules, 2014
Rule 13 (5) of Companies (Audit and Auditors)
Rules, 2014
The provision of this rule shall also apply, mutatis
mutandis, to a Cost Auditor and a Secretarial Auditor
during the performance of his duties under section
148 and section 204 respectively.
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CA. (Dr.) Gurmeet S Grewal
B. Com (Hons.), FCA, PhD., CAL (IIAM)
ca.grewalgurmeet@gmail.com
cagsgrewal@gmail.com
Phones: 09811242856 & 09266942856
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Section 2(59)- Definition of ‘Officer’
• “Officer” includes any director, manager or key
managerial personnel or any person in accordance
with whose directions or instructions the Board of
Directors or any one or more of the directors is or are
accustomed to act.
• Sec 2(51) “Key Managerial Personnel”, in relation to a
company, means—
(i) the Chief Executive Officer or the managing director or
the manager;
(ii) the company secretary;
(iii) the whole-time director;
(iv) the Chief Financial Officer; and
(v) such other officer as may be prescribed (not yet
prescribed).
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CARO, 2015 - Matters to be included in
the Auditor’s Report
• 12 clauses as against 21 in CARO,2003.
• All 12 clauses are existing clauses
modifications in some of them.
• Only additional reporting requirement is :
with
(vii)(c) - Whether the amount required to be
transferred to investor education and protection fund
in accordance with the relevant provisions of the
Companies Act, 1956 and Rules made thereunder
has been transferred to such fund within time.
51
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Changes in CARO, 2015 as compared to CARO, 2003
• Clause No. 3(i)(a) – Fixed Assets
• Part (c) regarding disposal of substantial part of
fixed assets and effect of such disposal on Going
Concern – Omitted.
• Clause 3(iii) - Loans given to Specified Parties
• Reference to Section 189 of the Companies Act,
2013 against 301 of Companies Act, 1956.
• Number of parties and amount involved – Omitted.
• Whether Rate of Interest and other terms and
conditions are prejudicial to the interest of the
company – Omitted.
52
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Changes in CARO, 2015 as compared to CARO, 2003
•
Clause 3(v) – Deposits accepted by the company
•
Word ‘from Public’ – Omitted. Now all deposits are
covered.
• Clause 3(vii)(a) – Statutory Dues
• VAT – added and
• Investor Education Fund – Omitted
• Clause 3(vii)(c) – Statutory Dues
• Modified Investor Education Fund – Added
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CARO, 2015
Members are advised to continue to draw in principle
guidance from the relevant paragraphs of the
Statement on the Companies (Auditor’s Report)
Order, 2003 issued by ICAI.
• 54
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Examples of Reporting u/s 143(3)(f)
Report on Other Legal and Regulatory Requirements
(f) As required by Section 143 (3) of the Act, we report
that:
The matter described under Emphasis of Matters
in the paragraph above, in our opinion, will not
have an adverse effect on the functioning of the
Company.
34
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