professional ethics
This query is : Resolved
03 June 2008
Can u tell me what is difference between material fact and material mis-statement?
This is in connection with clause 5 & 6 of part 1 of second schdule.I donot get when to apply clause 5 & clause 6
This is in connection with clause 5 & 6 of part 1 of second schdule.I donot get when to apply clause 5 & clause 6
05 June 2008
Material Fact means the fact which will give the other picture of the balance sheet. For eg : Company will be executing the contract with govt to the tune of Rs. 50 Cr.
Material Mis-statement means, there is some thing in the balance with is not giving ture & fair view of balance sheet & profitability.
Material Mis-statement means, there is some thing in the balance with is not giving ture & fair view of balance sheet & profitability.
09 June 2008
I first want your attention to wrodings of Clauses:
Clause (5) - Practising member to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary to make the financial statement not misleading
Clause (6) - Practising member to report a material mis-statement known to him to appear in a financial statement with which he is concerned in a professional capacity
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In clause (5) The Fact means " believe to be True" but it has not been stated in the Financial Statements.
in clause (6) the mis statement means " Wrong stating" i.e. the is statement is exist in the Financial Statements and it is Known to Practising member.
Clause (5) - Practising member to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary to make the financial statement not misleading
Clause (6) - Practising member to report a material mis-statement known to him to appear in a financial statement with which he is concerned in a professional capacity
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.
.
.
In clause (5) The Fact means " believe to be True" but it has not been stated in the Financial Statements.
in clause (6) the mis statement means " Wrong stating" i.e. the is statement is exist in the Financial Statements and it is Known to Practising member.
09 June 2008
01 November 2008
You can understand MATERIAL FACT by reading this:
An auditor must fully realize his moral obligations to third parties and in view of the fact that the reports made by him are likely to be relied on, he must use his utmost skill and care that the statements issued do reflect the true and accurate state of affairs and free from any ambiguity.
Section 227 of the companies act imposes a penalty on the auditors for non-compliance of sections 227 and 229 with payment of fine if the default is willful.
An auditor is liable to make good the loss the members or investors of a company may suffer as a result of the negligence on his part in the due performance of his duties. If there is fraud on his part, the auditor will be liable in tort. Claims may arise from the auditor failing to detect defalcations or discover errors that may have put the company to loss .
For the auditor to be held liable for fraud, it is necessary to prove the following four facts-
1. the statement signed by him was untrue in fact;
2. that the auditor knew that it was untrue or was recklessly ignorant whether it was true or not;
3. that the statement was made with the intent that the other party should act on it; and
4. that the other party did act in reliance on it and suffered damage.
**DM
An auditor must fully realize his moral obligations to third parties and in view of the fact that the reports made by him are likely to be relied on, he must use his utmost skill and care that the statements issued do reflect the true and accurate state of affairs and free from any ambiguity.
Section 227 of the companies act imposes a penalty on the auditors for non-compliance of sections 227 and 229 with payment of fine if the default is willful.
An auditor is liable to make good the loss the members or investors of a company may suffer as a result of the negligence on his part in the due performance of his duties. If there is fraud on his part, the auditor will be liable in tort. Claims may arise from the auditor failing to detect defalcations or discover errors that may have put the company to loss .
For the auditor to be held liable for fraud, it is necessary to prove the following four facts-
1. the statement signed by him was untrue in fact;
2. that the auditor knew that it was untrue or was recklessly ignorant whether it was true or not;
3. that the statement was made with the intent that the other party should act on it; and
4. that the other party did act in reliance on it and suffered damage.
**DM
01 November 2008
You can easily understand MATERIAL MIS-STATEMENT by reading this:
The Companies Act, 1956 also imposes criminal liability under section 628 on any person who intentionally makes a false statement through any return, report, certificate, balance sheet, prospectus, statement or other documents. The auditor who makes a false statement in his report that the balance sheet presents the true and fair view of the company's financial affairs is also liable .
Therefore, under this section the auditor will be liable if-
1. the statement complained of is false in material particular;
2. it has been made in any return, report, certificate, prospectus, statement, balance sheet or some other document required by or for the purposes of any of the provisions of the Act;
3. it has been made willfully knowing it to be false.
The shareholders of the company have mainly to depend upon the good faith and efficiency of the auditor appointed to check the accounts and certify the balance sheet of the company. It is of the highest importance that auditor's should perform their duties with scrupulous care, skill and vigilance to ensure that no transaction is illegal or improper and if he has reason to believe so, he must report it. Thus, the auditor must certify what he does not believe to be true and he must take reasonable care before he believes what he certifies to be true.
**DM
The Companies Act, 1956 also imposes criminal liability under section 628 on any person who intentionally makes a false statement through any return, report, certificate, balance sheet, prospectus, statement or other documents. The auditor who makes a false statement in his report that the balance sheet presents the true and fair view of the company's financial affairs is also liable .
Therefore, under this section the auditor will be liable if-
1. the statement complained of is false in material particular;
2. it has been made in any return, report, certificate, prospectus, statement, balance sheet or some other document required by or for the purposes of any of the provisions of the Act;
3. it has been made willfully knowing it to be false.
The shareholders of the company have mainly to depend upon the good faith and efficiency of the auditor appointed to check the accounts and certify the balance sheet of the company. It is of the highest importance that auditor's should perform their duties with scrupulous care, skill and vigilance to ensure that no transaction is illegal or improper and if he has reason to believe so, he must report it. Thus, the auditor must certify what he does not believe to be true and he must take reasonable care before he believes what he certifies to be true.
**DM
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