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AMENDMENTS IN AUDITING AND ASSURANCE

APPLICABLE FOR MAY 2019 EXAMS
(APPLICABLE FOR THE STUDENTS OF OLD & NEW SYLLABUS)

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Note:
Dear Students,
Amendments provided in this material were already included in the main materials that were
provided to you earlier. We have repeated such amendments since students can feel it to be
convenient if all the amendments are provided at one location. Don’t forget that in the public
examination, examiner will definitely be inclined to pose more questions on recent amendments.
For the sake of differentiation we have italicized all such amendments.
All latest amendments applicable for May - 2019 were included in this material. Students are
advised to pay special attention on all such areas.
No Need to teach this material, Students shall prepare on their own.

APPOINTMENT OF AUDITOR AND ALLIED ASPECTS

Q.No.1. State the matters to be specified in Auditor’s Report in terms of provisions of Section
143(3) of the Companies Act, 2013.

1. DUTY AS PER SEC 143(3): As per sec 143(3), the company’s auditors report shall include a
statement on the following matters:
a) Whether he has obtained all the information and explanations
i) Which to the best of his knowledge and belief were necessary for the purpose of his audit.
ii) If not, the details thereof and the effect of such information on the financial statements;
b) Whether, in his opinion, proper books of account as required by law have been kept by the
company and proper returns adequate for the purposes of his audit have been received from
branches not visited by him;
c) Whether the report on the accounts of any branch office of the company audited by a person
other than the company’s auditor has been sent to him and how he has dealt with it in
preparing his report;
d) Whether the company’s balance sheet and profit and loss account are in agreement with the
books of accounts and returns;
e) Whether, in his opinion, the financial statements comply with the Accounting Standards.
f) The observations or comments of the auditors on financial transactions or matters which have
any adverse effect on the functioning of the company.
g) Whether any director is disqualified from being appointed as a director under section 164 (2).
h) Any qualification, reservation or adverse remark relating to the maintenance of accounts and
other matters connected therewith.
i) Whether the company has adequate internal financial controls system in place and the
operating effectiveness of such controls.
j) Such other matters as may be prescribed.[Rule 11 of CAAR, 2014]
i) Whether the company disclosed the impact of pending litigations on its financial position in
its financial statement.
ii) Whether the company has made provisions, in accordance with Accounting standards or
any other law, for material foreseeable losses.
iii) Whether there is any delay in transferring the amounts to Investor Education Protection
Fund, if required to be transferred.
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2. REPORTING REQUIREMENTS U/S 143(3): It is mandatory for the auditor to report on the
matters specified under section 143(3) irrespective of whether he got clean or adverse
observations with respect to those matters.
DUTY TO STATE THE REASON FOR QUALIFICATION OR NEGATIVE REPORT: As per Section
143(4), where any of the matters required to be included in the audit report is answered in the
negative or with a qualification, the report shall state the reasons there for.

Q.No.2. What are the Disqualifications of a Company’s Auditor? (A)

A person or partner of a firm holding appointment as an auditor of more than twenty companies at the
date of such appointment or reappointment.
NOTE 1: The following companies are excluded while computing the ceiling limit (i.e. 20) on number
of appointments that an auditor can hold at a time.
i) One person companies
ii) Small companies
iii) Dormant companies
iv) Private limited companies having paid-up share capital less than Rs. 100 crore.
NOTE 2: For claiming exemption under section 141(3)(g) for counting ceiling limit is available
only if such company has not committed default in filing its financial statements under section
137 and annual returns under section 92 of the Act to the ROC

Q.No.3. State the matters to be specified in Auditor’s Report in terms of provisions of Section
143(3) of the Companies Act, 2013.

As per provisions of Section 143(3)(i) of companies Act, the Auditor Report shall state whether the
company has adequate internal financial controls system in place and the operating effectiveness of
such controls
Note:
1. As per Section 143(3)(i) The auditors of all the companies shall report on the adequacy of
internal financial control systems and its operating effectives. As per the recent
amendment, the auditors are required to report on Internal Financial Control with reference
to financial statements.
2. Requirements of reporting under section 143(3)(i) read Rule 10 A of the Companies (Audit
and Auditors) Rules, 2014 of the Companies Act 2013 shall not apply to following private
companies
 One person Company (OPC)
 Small Company;
 Private company which has turnover less than Rs. 50 Crores as per latest audited
financial statement or which has aggregate borrowings from banks or financial
institutions or any body corporate at any point of time during the financial year less
than Rs. 25 Crore.
3. The above exemption shall be applicable to a private company which has not committed a
default in filing its financial statements under section 137 of the Companies Act 2013 or
annual return under section 92 of Act with the Registrar.
4. The exemption shall be applicable for those audit reports in respect of financial statements
pertaining to financial year, commencing on or after 1st April, 2016,

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Q.No.4. Discuss the duties of auditor in case of Resignation.

1. Duty of auditor in case of resignation in any company:

a) Filing of Form ADT-3 [Sec.140 (2)]: The auditor who has resigned from the company shall
file a statement in the prescribed Form ADT-3 (as per Rule 8 of CAAR) indicating the reasons
and other facts relevant to his resignation, within 30 days from the date of resignation.
i) with the company,
ii) with the ROC and
iii) In case of government companies, the auditor shall also file such statement with the CAG.
b) Penalties for non-filing ADT-3 in case of Non-Government company [Sec.140(3)]:
In case of failure, the auditor shall be punishable with fine of
i) Minimum: Rs. 50,000
ii) Maximum: Rs. 5,00,000
c) Penalties for non-filing ADT-3 in case of Government company [Sec.140(3)]:
In case of failure, the auditor shall be punishable with fine of
i) Minimum: Rs. 50,000 or the remuneration of the auditor, whichever is less
ii) Maximum: Rs. 5,00,000

Q.No.5. Write about Powers / Rights of an Auditor. (A)

1. RIGHT OF ACCESS TO BOOKS, DOCUMENTS, VOUCHERS etc. [Sec. 143(1)]:

This right of access can be exercised
a) At all - time i.e. during Working Days and working Hours
b) With respect to any books and documents which are necessary for his purpose including
statistical records, minutes etc. and need not always to be the financial books.
c) Even without any prior notice to the company.
d) With respect to books, documents etc. whether kept at the registered office of the company or
at any other place as may be decided by the board as per sec. 128.
e) With respect to books and documents maintained at branch office (irrespective of branch
audit).
f) By auditor of holding company with respect to books of subsidiary companies in so far it
relates to consolidation of financial statements
g) Right of access by the auditor of a holding company to the accounts and records of the
associate company, whose accounts are required to be consolidated.
Points to be remembered:
Section 147 of the Companies Act, 2013 prescribes following punishments for contravention:
1. If any of the provisions of sections 139 to 146 (both inclusive) is contravened,
a) the company shall be punishable with fine which
i) Minimum: Rs. 25,000
ii) Maximum: Rs. 5,00,000 and
b) Every officer of the company who is in default shall be punishable with
i) imprisonment for a term which may extend to one year or
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ii) with fine

 Minimum Rs. 10,000
 Maximum: Rs. 1,00,000, or
iii) with both.
2. If an auditor of a company contravenes any of the provisions of section 139, section 143, section
144 or section 145, the auditor shall be punishable with fine.
a) Minimum: Rs. 25,000
b) Maximum: Rs. 5,00,000 or four times the remuneration of the auditor, which ever is less.
3. It may be noted that if an auditor has contravened such provisions knowingly or willfully with the
intention to deceive the company or its shareholders or creditors or tax authorities, he shall be
punishable with imprisonment for a term which may extend to one year and with fine
a) Minimum: Rs. 50,000
b) Maximum: Rs. 25,00,000 or eight times the remuneration of the auditor, which every is
less
4. Where an auditor has been convicted under sub-section (2), he shall be liable to:-
a) refund the remuneration received by him to the company;
b) and pay for damages to the company statutory bodies or authorities or to members or the
creditors of the Company for loss arising out of incorrect or misleading statements of
particulars made in his audit report.
5. Where, in case of audit of a company being conducted by an audit firm, it is proved that the
partner or partners of the audit firm has or have acted in a fraudulent manner or abetted or
colluded in an fraud by, or in relation to or by, the company or its directors or officers, the liability,
whether civil criminal as provided in this Act or in any other law for the time being in force, for
such act shall be the partner or partners concerned of the audit firm and of the firm jointly and
severally Provided that in case of criminal liability of an audit firm, in respect of liability other than
fine, the concerned partner or partners, who acted in a fraudulent manner or abetted or, as
the case may be, colluded in any fraud shall only be liable.

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