Guidance Note on Reporting under Section 143 by AASB. Download Guidance Note on Reporting under Section 143 (3)(f) and (h) of the Companies Act, 2013. Read Full news From Below.
Guidance Note on Reporting under Section 143 by AASB
1. Section 143 of the Companies Act, 2013 (hereinafter referred to as the “Act”) deals with the powers and duties of the auditors of companies. Section 143(1) of the Act requires the auditor to make certain specific enquiries during the course of the audit. Section 143(2) of the Act requires the auditor to, inter alia, give his report to the members of company on the accounts examined by him, and on every financial statement which are laid before the company in a general meeting. Subsection (3) of section 143 of the Act also lays down certain matters required to be reported upon by the auditor in his report. Sub-section (3) of section 143 of Act provides as follows:
“(3) The auditor’s report shall also state –
(a) 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;
(b) whether, in his opinion, proper books of account as required by law have been kept by the company so far as appears 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;
(c) whether the report on the accounts of any branch office of the company 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;
(d) whether the company’s balance sheet and profit and loss account dealt with in the report are in agreement with the books of account 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 sub-section (2) of section 164;
(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.1
Scope of the Guidance Note
2. This Guidance Note is intended to assist the auditors in discharging their duties in respect of clauses (f) and (h) of sub-section (3) of section 143 of the Act. Clause (f) of the said sub-section creates a requirement for the auditor to consider observations or comments of the auditor on financial transactions or matters which have an adverse effect on the functioning of the company. Such observations or comments would ordinarily lead to the modification of or an emphasis of matter in the auditor’s report on financial statements. It may be noted that the matters that lead to modification in the auditor’s report on financial statements are matters that give rise to a qualified opinion, adverse opinion or a disclaimer of opinion2 . Further, matters that lead to an emphasis of matter paragraphs are matters appropriately presented or disclosed in the financial statements that, in the auditor’s judgement, are of such importance that they are fundamental to the users’ understanding of the financial statements3 . If the matter leading to the modification of the auditor’s opinion or an emphasis of matter in the auditor’s report on financial statements is likely to have an adverse effect on the functioning of the company, the auditor is required to report such matter. Under clause (h) of sub-section (3) of section 143 of the Act, the auditor is required to state whether any matter leading to a qualification, reservation or adverse remark, that is, effectively the modification of the auditor’s report on financial statements, relates to the maintenance of accounts and other matters connected therewith.