DIFFERENT TYPES OF

AUDIT
CERTIFICATES

SEBIN SEBASTIAN
LOCAL FUND AUDIT ACT 1994
LOCAL FUND AUDIT RULES 1996
 AUDIT CERTIFICATE
AUDIT MANUAL .VOLUME 1
4.2.1.1. Objectives of Financial Audit

The primary objective of Financial Audit is to express an opinion on

the financial statements in the Audit Report or by means of an
exclusive Audit Certificate if it is so provided in the relevant Audit
Standards such as those applicable for Local Authorities.
4.2.1.2. Certification of Accounts
Section 4 and Section 5 of the Act do not mandate the KSAD to certify the financial statements.
However, as the objective of conducting the Financial Audit is to express an opinion on Financial
Statements, certification of financial statements becomes necessary.

It is also mandatory under the Audit Standards issued by CAG of India, to issue Audit Certification
with or without accompanying certification of their financial statements in respect of audit of
Panchayati Raj Institutions and Urban Local Bodies. However, the best practices for certification
suggest, that the auditors should certify the financial statements on which they are expressing an
opinion. As per the CAG standards and guidance, normally financial audit will result in issuing an
Audit Certificate and in those audits, financial Audit Reports and Audit Certificate are synonymous.

When an audit opinion is used to convey the level of assurance, the opinion should be in a
standardised format. The opinion may be unmodified or modified. An unmodified opinion is used
when either limited or reasonable assurance has been obtained.
 AUDIT MANUAL .VOLUME 1
3.2.4. Audit Report and Certification of Accounts

• It appears from the provisions of the Act that the mandate of KSAD is
to audit the accounts as presented to them by the respective local
funds/local authorities and submit only an audit report and the mandate
does not extend to certification of accounts.

• A significant portion of the audit of KSAD is the financial and

compliance transaction audit and therefore the scope of audit report
should be wider than just reporting only on those items as per section
14.(Rule 19)
 AUDIT MANUAL .VOLUME 1
3.2.4. Audit Report and Certification of Accounts

• Certification of annual accounts involves verification and examination of

books of original entry, ledgers, registers, subsidiary books of accounts,
etc., to see that accounts are in accordance with the books.

• as per the extant

CAG guidelines and the circular No 2/2008 issued by the Director, KS
AD
, in the case of audit of PRIs/ULBs, auditor is required to issue an
Auditors Certificate, the first part of which would provide the scope of
audit and second part would give the auditors’ opinion on accounts. , This
certification process may be extended to all the entities audited
 This opinion may be

(i) Qualified
(ii) Unqualified
(iii) Adverse
(iv) Disclaimer
(i) Qualified
A Qualified Opinion, is given when in the opinion of auditors
there are material misstatements in the financial statements,
either individually, or in aggregate, which can distort the
financial information/financial statements as a whole. A
qualified opinion is also given when auditors are unable to
obtain audit evidence to conclude that financial statements are
free from material misstatements.
(ii) Unqualified
An Unqualified Opinion is given when in the opinion of auditors the
financial statements are prepared in accordance with applicable
financial reporting framework in all material aspects and are free from
any material errors, irregularities or misstatements; it is also necessary
to ensure that books of accounts do not contain any material errors,
irregularities and misstatements. This also requires the following:
 Accounting policies are followed consistently
 There are adequate disclosures relevant for a proper understanding
of financial statements
 Departures from accounting rules/standards are adequately explained
and justified in the opinion of auditors.
(iii) Adverse
An Adverse Opinion, is given when having obtained all audit evidence, in
the opinion of auditors, there are material misstatements which are not
only material but pervasive for the whole set of financial statements and
books of accounts. In other words, when auditors have fundamental
disagreements on the books and the financial statements, an adverse
opinion is expressed. The auditors should generally state that:
(iv) Disclaimer
A Disclaimer Opinion, is given when there exist fundamental
uncertainties and the auditors are unable to obtain sufficient and
appropriate evidence and as a result conclude that misstatements in the
financial statements can be both material and pervasive. In all such cases
auditors will state in their reports that they are unable to form and give
any opinion on the accounts and financial statements.

Non production of accounting and financial records which may result in

direct “disclaimer” form of audit certificate
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