Meet Gaurang Parikh asked 3 years ago
Solution as per the answer key provided is – (d) i.e. auditor need not qualify his report
Shouldn’t the answer be (b), i.e. auditor should qualify his report since the financial statements are not as per the Accounting standards and therefore would attract 143(3)(e)?
The board has merely accepted the auditor’s contention but the financial statements have still not been corrected.
Kindly clarify
Ravi Staff answered 3 years ago
SBC Private Limited appointed Mr. Vijay, Chartered Accountant as auditor of the company for the year 2017-18. While verifying the accounts Mr. Vijay noticed that the company has neither made any provision for accrued gratuity liability nor obtained the actuarial valuation thereon. Mr. Vijay obtained the actuarial valuation and includes the matter in his Audit Report to the Company’s Board of Directors mentioning t h e a m o u n t o f a c c r u e d l i a b i l i t y n o t p r o vi d e d f o r . T h e B o a r d a g r e e d w i t h t h e a u d i t o r ’ s o b s e r va t i o n a n d t h e amount of liability quantified by him. But the auditor didn’t disclose the same in his audit report to Member’s. One of the members raised an objection on the audit report stating that it does not represent a true and fair view as even though the company has not maintained proper books of accounts as per accounting standards, the auditor has not qualified his report. Whether the auditor is require to give a qualified opinion in his report to members on non-provision of gratuity in company’s accounts when the same has already been included in the report to Company’s Board of Directors?
(a) As the auditor has already disclosed the matter of non-provisioning in his report to Company’s Board of Directors, there is no need to disclose the same in report to Member’s u/s 143 of the Companies Act, 2013.
(b) Non-provisioning for accruing gratuity is in contravention to applicable Accounting Standard (AS-15), therefore the auditor should qualify his report to members through a paragraph on failure of management to quantify the amount of liability.
(c) The auditor should revise the accounts as per the actuarial valuation obtained by him and the r e vi s e d a c c o u n t s o n l y s h o u l d b e p r e s e n t e d b e f o r e t h e B o a r d o f D i r e c t o r s a n d M e m b e r s . T h e a u d i t o r is not required to qualify his report.
(d) U/s 143 of the Companies Act, 2013, the auditor should qualify his report to members only when the matter reported by the auditor is answered in the negative or with a qualification by the Board. In the above case the board agreed with the auditor’s observation so he need not qualify his report.
ICAI MCQ – 9.CA 1 – M19M Pg 40 – SBC private limited