NAME: ISHITA A KADAM

DIV: C

ROLL NO: 274

SUBJECT: AUDIT AND TAX (SEM 6)

Meaning:

The auditing of the accounts of a company is usually done by an independent external

auditor. An audit report is a letter from the auditor of a company that is the end result of the
audit process. It states the auditor’s opinion on whether the company’s financial statements
such as the balance sheet are in compliance with the generally accepted accounting principles
(GAAP) and if they are free from material misstatement.

The audit report is generally accompanied by the company’s annual report. The audit report
is required by banks, financial institutions, investors, creditors, and regulators. When the
auditor issues a clean report, it means that the company’s financial statements have been
found to be fully compliant with accounting standards.

Audit reports are very important to a company. Investors rely on the audit report to assess the
financial health of the company and they base many important decisions on the audit report.
Regulatory bodies also read the audit report as it tells them how accurate the financial
information reported is. When an audit report is adverse it can seriously affect the company’s
status and reputation. It is essential to have good accounting practices so that the audit of
accounts goes well.

Four Types of Audit Reports:

There are four types of audit reports issued by auditors on financial statements. Each type of
report contains different meanings and messages from auditors to users of financial
statements.

Those audit reports included the Unqualified Audit Report (Clean Audit Report), Qualified
Audit Report, Disclaimer Audit Report, and Adverse Audit Report. The following are the
detail of audit reports.

1. Unqualified Audit Report (Clean Audit Report):

The auditor issued an unqualified audit report to financial statements when auditors found no
material misstatements after their testing. Therefore, this report contains an unqualified
opinion from an independent auditor. The report showed that the entity financial statements
are prepared and present true and fair and complying with the accounting framework being
used. An unqualified Audit report apparently shows the shareholders that financial statements
are a true and fair presentation and free from all material misstatements. But also imply that
the management team has high integrity to the shareholders.

2. Qualified Audit Report:

The qualified Audit report is the reported issue by auditors to the financial statements that
found material misstatements. But those material misstatements are not pervasive. For
example, the opening balance of the entity contains a large number of inventories that could
not verify. In this case, the auditor issue a qualified audit opinion on the qualified audit
report. However, if the auditor thinks that the misstatement is pervasive, they will issue an
adverse opinion in their report. In this kind of report, only inventories that mention are
matter. Other financial information in the financial statements is true and fair.

3. Adverse Audit Report:

An adverse Audit Report is a type of audit report issued to the financial statements when
auditors found material misstatements in the financial statements. The misstatements found
here are different from the material misstatements found in qualified audit reports. They are
materially misstated for themselves and affect others’ accounts and items in the whole
financial statements. These are called pervasive. That means all the items and accounts in the
whole financial statements could not be trusted by shareholders, investors, and other
stakeholders. In this report, auditors will list down the client name, financial statements that
they were audited and the period the financial statements covered. Auditors will also state all
misstatements found and how they have affected the financial statements and their users.

4. Disclaimer Audit Report:

The disclaimer audit report is the report that issues the financial statements where there is
matter to auditor’s independence and those mater because auditors are not able to obtain
sufficient audit evidence to support their opinion. This has happened when auditors are
prevented to access to certain information related to items or accounts in financial statements
while those items or accounts are believed to be materially misstated and pervasive. Auditors
might not issue the disclaimer opinion if the restrictions are made only the items or accounts
that material misstated but not pervasive.

ANALYSIS OF AUDITOR’S REPORT OF INFOSYS LIMITED:

1. In respect of the Company’s fixed assets

(a) The Company has maintained proper records showing full particulars,
including quantitative details and situation of fixed assets.
(b) The Company has a program of verification to cover all the items of fixed
assets in a phased manner which, in our opinion, is reasonable having regard to
the size of the
Company and the nature of its assets. Pursuant to the program, certain fixed
assets were physically verified by the management during the year. According
to the information and explanations given to us, no material discrepancies were
noticed on such verification.
(c) According to the information and explanations given to us, the records
examined and based on the examination of the conveyance deeds / registered
sale deed provided, we report that, the title deeds, comprising all the immovable
properties of land and buildings which are freehold, are held in the name of the
Company as at the balance sheet date.

2. The Company is in the business of providing software services and does not
have any physical inventories. Accordingly, reporting under clause 3 (ii) of the
Order is not applicable to the Company.

3. According to the information and explanations given to us, the Company has
granted unsecured loans to four bodies corporate, covered in the register
maintained under section 189 of the Companies Act, 2013, in respect of which:
(a) The terms and conditions of the grant of such loans are, in our opinion,
prima facie, not prejudicial to the Company’s interest.
(b) The schedule of repayment of principal and payment of interest has been
stipulated and repayments or receipts of principal amounts and interest have
been regular as per stipulations.
(c) There is no overdue amount remaining outstanding as at the year-end.

4. In opinion and according to the information and explanations given to us, the
Company has complied with the provisions of Sections 185 and 186 of the Act
in respect of grant of loans, making investments and providing guarantees and
securities, as applicable. There were no loans granted during the year under
Section 185 of the Act.

5. The Company has not accepted deposits during the year and does not have
any unclaimed deposits as at March 31, 2021 and therefore, the provisions of
the clause 3 (v) of the Order are not applicable to the Company.

6. The maintenance of cost records has not been specified by the Central
Government under section 148(1) of the Companies Act, 2013 for the business
activities carried out by the Company. Thus reporting under clause 3 of the
order is not applicable to the Company.

7. According to the information and explanations given to us, in respect of

statutory dues:
(a) The Company has generally been regular in depositing undisputed statutory
dues, including Provident Fund, Employees’ State Insurance, Income Tax,
Goods and Service Tax, Customs Duty, Cess and other material statutory dues
applicable to it with the appropriate authorities.
(b) There were no undisputed amounts payable in respect of Provident Fund,
Employees’ State Insurance, Income Tax, Goods and Service Tax, Customs
Duty, Cess and other material statutory dues in arrears as at March 31, 2021 for
a period of more than six months from the date they became payable.
8. The Company has not taken any loans or borrowings from financial
institutions, banks and government or has not issued any debentures. Hence
reporting under clause 3 of the Order is not applicable to the Company.

9. The Company has not raised moneys by way of initial public offer or further
public offer (including debt instruments) or term loans and hence reporting
under clause 3 of the Order is not applicable to the Company.

10. To the best of our knowledge and according to the information and
explanations given to us, no fraud by the Company or no material fraud on the
Company by its officers or employees has been noticed or reported during the
year.

11. In opinion and according to the information and explanations given to us,
the Company has paid/provided managerial remuneration in accordance with
the requisite approvals mandated by the provisions of section 197 read with
Schedule V to the Act.

12. The Company is not a Nidhi Company and hence reporting under clause 3
of the Order is not applicable to the Company.

13. In opinion and according to the information and explanations given to us,
the Company is in compliance with Section 177 and 188 of the Companies Act,
2013 where applicable, for all transactions with the related parties and the
details of related party transactions have been disclosed in the standalone
financial statements as required by the applicable accounting standards.

14. During the year, the Company has not made any preferential allotment or
private placement of shares or fully or partly paid convertible debentures and
hence reporting under clause 3 of the Order is not applicable to the Company.

15. In opinion and according to the information and explanations given to us,
during the year the Company has not entered into any non-cash transactions
with its Directors or persons connected to its directors and hence provisions of
section 192 of the Companies Act, 2013 are not applicable to the Company.

16. The Company is not required to be registered under section 45-IA of the
Reserve Bank of India
Act, 1934.

Conclusion:
To the best of the information provided and according to the explanations given to us, we can
conclude that the Company has, in all material respects, an adequate internal financial
controls system over financial reporting and such internal financial controls over financial
reporting were operating effectively as at March 31, 2021, based on the criteria for internal
financial control over financial reporting established by the Company considering the
essential components of internal control stated in the Guidance Note on Audit of Internal
Financial Controls Over Financial Reporting issued by the ICAI.