audit reports under cos act 2013 and sa 700 revised april 15

AUDIT REPORTS IN Cos Act 2013 FRF

ASHOK SETH, LucknowB. Sc, FCA, DISA (ICA)

[email protected]

mailto:[email protected]

CA Ashok Seth 2

Standards for Reporting SA 700 (Revised) Forming an Opinion &

Reporting on FS SA 705 Modification to the Opinion in IAR SA 706 Emphasis of Matter Paragraphs in IAR SA 710 (Revised) Comparative Information SA 2400 (Review) Engagement to review FS SA 3400 The Examination of Prospective FS SA 4400 To perform Agreed upon Procedures SA 4410 Engagement to compile Financial

Information

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AS 700 (Revised) EFFECTIVE FROM

For ALL audits relating to accounting periods beginning on or after 1st April 2011.

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Forming an Opinion on the FS

Shall form an opinion whether FS are prepared in all material respects in accordance with applicable Financial Reporting Framework (FRF)

Contd.


Forming an Opinion- Contd.

to form that opinion, the auditor shall conclude as to whether he has obtained reasonable assurance about whether the FS as a whole are free from material misstatement, whether due to fraud or error. That conclusion shall take into account: That the Auditor’s conclusions is

Contd.30 Aprrl 2015 CA Ashok Seth 5

Forming an Opinion- Contd.

in accordance with SA 330, whether sufficient appropriate audit evidence has been obtained;

in accordance with SA 450, whether uncorrected misstatements are material, individually or in aggregate; &

The evaluations required by Para 12-15.


Auditor shall evaluate whether

The FS adequately disclose the significant accounting policies selected and applied;

The accounting policies selected and applied are consistent with the applicable financial reporting framework and are appropriate;

The accounting estimates made by management are reasonable; Contd.


Auditor shall evaluate whether- Contd. The information presented in the financial

statements is relevant, reliable, comparable and understandable;

The financial statements provide adequate disclosures to enable the intended users to understand the effect of material transactions and events on the information conveyed in the financial statements; and (Ref: Para. A4)

The terminology used in the financial statements, including the title of each financial statement, is appropriate


FORM OF OPINION

Unmodified Opinion When FS in all material respects

prepared in accordance with FRF Modified Opinion- SA 705

If based upon the audit evidence FS as a whole are not free from material misstatement

If unable to obtain sufficient appropriate audit evidence


for Audits Conducted in Accordance with S A

Title Addressee Introductory paragraph Management Responsibility for the FS Auditor’s Responsibility Auditor’s Opinion Other Reporting Responsibilities Date, Place and Signature of the Auditor


Title & Addressee

Title (A15) “Independent Auditors Report”

Addressee (A16) As required by the circumstances Normally addressed to those for whom

the report is prepared Report on the Standalone Financial

Statements


Introductory paragraph (A17 to A19)

SHALL: - Identify the entity State that the FS have ben audited Identify the title of each statement that

comprises FS Refer to summary of Significant

Accounting Policies and other explanatory information

Specify the date or period covered by each FS


Management Responsibility for the FS

Use the term that is appropriate in legal or regulatory framework applicable May not be word “management” May be “those charged with governance” Board of Directors under Co Act

report shall include a section with the heading “Management’s [or other appropriate term] Responsibility for the FS Contd.


AUDITOR’S RESPONSIBILITY

The shall include a section with the heading “Auditor’s Responsibility”.

The auditor’s report shall state that the responsibility of the auditor is to

express an opinion on the financial statements based on the audit.

Contd.


Audit Report Shall also describe that: -

An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by management, as well as the overall presentation of the financial statements

whether the auditor believes that the audit evidence the auditor has obtained is sufficient and appropriate to provide a basis for the auditor’s opinion


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Auditor’s Opinion- Section with the heading “Opinion” In an unmodified opinion in accordance with

a fair presentation framework, the auditor’s opinion shall, unless otherwise required by law or regulation, use one of the following phrases, (A26-A32) (a) The financial statements present fairly, in all

material respects, in accordance with [the applicable financial reporting framework]; or

(b) The financial statements give a true and fair view of in accordance with [the applicable financial reporting framework].

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Other Reporting Responsibilities

these other reporting responsibilities shall be addressed in a separate section in the auditor’s report that shall be sub-titled “Report on Other Legal and Regulatory Requirements,” or otherwise as appropriate to the content of the section. (A33-A34)

Contd.30 Aprrl 2015 CA Ashok Seth 17

Signatures, Date, Place Shall be Signed The auditor’s report shall be dated no earlier

than the date on which the auditor has obtained sufficient appropriate audit evidence, including evidence that: (a) All the statements in the FS, including the

related notes, have been prepared; and (b) Those with the recognised authority have

asserted that they have taken responsibility for those FS

Location where the Report is signed


Auditor’s Report Prescribed by Law or Regulation

When the differences between the legal or regulatory requirements and SAs relate only to the layout and wording of the auditor’s report and, at a minimum, each of the elements identified in paragraph 43(a)-(i) are included in the auditor’s report, the auditor’s report may refer to Standards on Auditing. Otherwise Auditor may not refer to SA


Illustration -1 (Under Cos Act 2103 FRF) SA 700

The report is unmodified and include an Emphasis of Matter paragraph and Other Matter(s) paragraph

including the responsibility to report on internal financial controls pursuant to section 143(3)(i) of the Companies Act 2013

other reporting responsibilities required under the Cos Act 2013 and the Rules thereunder.



The report is unmodified and include an Emphasis of Matter paragraph and Other Matter(s) paragraph

Does not include the responsibility to report on internal financial controls pursuant to section 143(3)(i) of the Companies Act 2013

other reporting responsibilities required under the Cos Act 2013 and the Rules thereunder.


SA 705 When Modification Required

The auditor concludes that, based on the audit evidence obtained, the FS as a whole are not free from material misstatement; or (Ref: Para. A2-A7)

The auditor is unable to obtain sufficient appropriate audit evidence to conclude that the FS as a whole are free from material misstatement. (Ref: Para. A8-A12)


SA 705- Modification to the Opinion in the IAR

Three Types of Modified Opinions: - Qualified Opinion (Subject to True & fair) Adverse Opinion (Not true & Fair) Disclaimer Opinion

Refer Para A1 for decision regarding which type of modified opinion is appropriate depends upon


Decision Matrix

Nature of Matter Giving

Rise to theModification

Auditor’s Judgment about the Pervasiveness of the Effects or

Possible Effects on the FSMaterial but Not

PervasiveMaterial and

Pervasive

FS arematerially misstated

Qualified Opinion Adverse Opinion

Inability to obtain sufficient

appropriate audit evidence

Qualified Opinion Disclaimer of opinion


Modified Opinion- Form & Content

Shall, include a Para in the report that provides a description of the matter giving rise to the modification.

Place this Para immediately before the opinion Para in the report & use the heading “Basis for Qualified Opinion”, “Basis for Adverse Opinion”, or “Basis for Disclaimer of Opinion”, as appropriate. (Ref: Para. A17)


Modified Opinion- Form & Content- Contd.

material misstatement that relates to specific amounts in the FS (including quantitative disclosures), the auditor shall include in the basis for modification Para a description & quantification of the financial effects of the misstatement, unless impracticable. If it is not practicable to quantify the financial effects, the auditor shall so state in the basis for modification paragraph


Modified Opinion- Form & Content- Contd. If there is a material misstatement of the FS

that relates to narrative disclosures, the auditor shall include in the basis for modification Para an explanation of how the disclosures are misstated Describe in the basis for modification Para the

nature of the omitted information; and Unless prohibited by law, include the omitted

disclosures, provided it is practicable to do so and the auditor has obtained sufficient appropriate audit evidence about the omitted information.


Modified Opinion- Form & Content- Contd.

If the modification results from an inability to obtain sufficient appropriate audit evidence, the auditor shall include in the basis for modification paragraph, the reasons for that inability.


Qualified Opinion- material misstatement

State that, except for the effects of the matter(s) described in the Basis for Qualified Opinion paragraph


Qualified Opinion- Inability to obtain sufficient evidence

shall use the corresponding phrase “except for the possible effects of the matter(s)...” for the modified opinion.


Adverse Opinion

State- because of the significance of the matter of the matter(s) described in the Basis for Adverse Opinion paragraph when reporting in a fair presentation

framework -The FS do not present fairly, (or give a true and fair view) in accordance with the applicable FRF; or


Disclaimer Opinion- Inability to obtain sufficient evidence

shall state in the opinion paragraph that because of the significance of the matter(s)

described in the Basis for Disclaimer of Opinion paragraph, the auditor has not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion; and, accordingly,

the auditor does not express an opinion on the financial statements


Description of Auditor’s Responsibility

When the Auditor Expresses a Qualified or Adverse Opinion the auditor shall amend the description

of the auditor’s responsibility to state that the auditor believes that the audit evidence the auditor has obtained is sufficient and appropriate to provide a basis for the auditor’s modified audit opinion.


Description of Auditor’s Responsibility

When the Auditor Disclaims an Opinion due to an inability to obtain sufficient

appropriate audit evidence- shall amend the introductory paragraph of the report to state that the auditor was engaged to audit the FS. The auditor shall also amend the description of the auditor’s responsibility


Contd. and the description of the scope of the

audit to state only the following: “Our responsibility is to express an opinion on the FS based on conducting the audit in accordance with SA issued by the ICAI. Because of the matter(s) described in the Basis for Disclaimer of Opinion paragraph, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion”.



The report is having QUALIFIED OPINION with respect to the true and fair view of the financial statements on account of misstatement of inventories. The misstatement is deemed to be material but not pervasive to the financial statements

and include Other Matter(s) paragraph



The report is having QUALIFIED OPINION with respect to the true and fair view of the financial statements as auditor was unable to obtain sufficient appropriate audit evidence. The misstatement is deemed to be material but not pervasive to the financial statements



Has issued an Adverse opinion on the true and fair view of the financial statements on account of events that indicate a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern which has not been disclosed in the financial statements (and notes thereto)


Illustration -6 (Under Cos Act 2103 FRF) SA 705 Has given a disclaimer of opinion on the FS on

account of the fact that the auditor was unable to obtain sufficient appropriate audit evidence about multiple elements of the financial statements. That is, the auditor was unable to obtain audit evidence about the entity’s inventories and accounts receivable. The possible effects of this inability to obtain sufficient appropriate audit evidence are deemed to be both material and pervasive to the financial statements


Emphasis of Matter Para and Other Matter Para- SA 706

Additional communication in the auditor’s report to draw users’ attention to a matter or matters presented or disclosed in the FS or other than those presented

that are of such importance that they are fundamental to users’ understanding of the FS


When Auditor includes Emphasis of matter Paragraph Include it immediately after the Opinion

paragraph Use the heading “Emphasis of Matter”, or

other appropriate heading Include in the Para a clear reference to the

matter being emphasized and to where relevant disclosures that fully describe the matter can be found in the FS; and

Indicate that the auditor’s opinion is not modified in respect of the matter emphasized.


THANK YOU

Please mail your comments to

[email protected]

30 Aprrl 2015 42CA Ashok Seth

mailto:[email protected]

audit reports under cos act 2013 and sa 700 revised april 15

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