Scope of Reporting of Auditors in Audit Report as per MCA

An auditor plays a significant role in reviewing and verifying the financial records of a company while ensuring that Companies have complied with the statutory norms. Thus, fulfilling the primary role of preventing fraud and protecting the interest of creditors, financial institutions, the public, etc.

Section 143 of the Companies Act, 2013, along with Chapter X the Companies (Audit and Auditors) Rules, 2014, provides the powers and duties of auditors. This article highlights the role of the auditor in the Audit Report as per MCA.

Power and Duties of Auditors:

• Right to access books of accounts and all other necessary records of the company.
• Right to access the records of subsidiaries/associate companies (if any).
• Shall make a report as per the accounts examined by him to the members of the company to be laid before the company in general meeting
• Must report any fraud in the company by its officers/employees to the Central Government or audit committee (as per the amount of fraud involved) in the manner provided by the Act.

Details to be provided in the Auditors Report:

• The necessary information has been obtained for the audit. Also, it needs to provide the effect of such information on the financial statements.
• The books and returns of the company and its branches have been received by him for purpose of audit.
• Details of any litigation pending.
• Details of director disqualification (if any).
• Remarks on matters having any sort of adverse effect on the functioning of the company.
• The financial statements are in accordance with the accounting standards. Also, mention details of discrepancies in accounting methods (if any).
• Internal financial controls with reference to financial statements.
• Any delay in transferring the amount to the Investor Education and Protection Fund by the company (which was required to be transferred).
• Provisions made by the company as per any law or accounting standards, for material foreseeable losses (if any).

Additional Disclosures mandated by Auditors Report:

The notification issued by the Ministry of Corporate Affairs dated March 24, 2021, introduced the Companies (Audit and Auditors) Amendment Rules 2021. The notification omitted Clause (d) and incorporated clause (e), (f), (g) in the in Rule of the Companies (Audit and Auditors) Rules, 2014.

As per these clauses, the auditor has to furnish the details provided below in the Auditors report:

• Compliance with dividend provisions.
• Preservation and non-tampering of an audit trail in the accounting software.
• Details of funds advanced/ loaned/ invested by the company, that shall be either directly or indirectly to be loaned/ invested in other persons/entities by such receiving party by or on behalf of the company. The same shall apply to the amount received by the company to be invested further on behalf of the funding party by the company.

The auditors must comply with the auditing standards at all times and where the reasons shall accompany any qualification mentioned in the report. Further, it is also to be considered that the audit trail system and additional reporting requirements will help ensure proper compliance by the company.