There have been several mails and calls seeking clarifications on the Auditors Report to be issued for the period ended March 31, 2015. I summarise the issues as under in the form of an FAQ.
What is the present ( as at April 9, 2015 ) position on Auditors Report under Companies Act 2013 ?. Do we follow the old format or the new format. Is CARO Applicable ?
Answer :
1. The old format under the Companies Act 1956 will not apply and one has to cognise for the new 2013 Act and the rules made thereunder in respect of Section 143
2. No CARO is not applicable as of date. The ICAI communication is attached in this regard ( Note 1 )
3. The key differences between the erstwhile format and the present status is as under
a. ICOFR required but deferred by one year ( for periods commencing on or after April 1, 2015 )
b. Adverse remarks or comments on maintenance of accounts ( to be reported only if there is an issue )
c. Such other matters as may be prescribed
i. CARO pending
ii. 3 aspects notified - impact of pending litigation, Investor Protection fund and provisions for foreseeable losses on long term contracts ( applicable )
4. Format of audit report – The ICAI has provided some illustrative guidance as appended below. ( Note 2 ). One Illustrative format is attached
Note 1 :
ANNOUNCEMENT ON CARO, 2003 AND ADDITIONAL REPORTING UNDER THE COMPANIES ACT, 2013
We are receiving queries from the members regarding applicability of CARO, 2003 along with Auditors’ Report on financial statements of companies for the financial year 2014-15. The Ministry of Corporate Affairs (MCA) is working on it and has constituted a Committee for this purpose to analyse the contents of the Order to be made under section 143(11) of the Companies Act, 2013 for the Financial Year 2014-15. ICAI is also a member of the said committee. We are given to understand by MCA that an Order being a smaller version of CARO 2003, applicable for the financial year 2014-15, may be notified soon under section 143(11) of the Companies Act, 2013. However, at this juncture, to bring more clarity, this Announcement is released in consultation with the Ministry.
The Companies Act, 1956 has ceased to have effect from 01st April, 2014. As a corollary, the Companies (Auditor’s Report) Order, 2003 issued under section 227(4A) of the said Act also ceases to have effect from the said date.
Section 143(11) of the Companies Act, 2013 which came into force from 01st April, 2014 provides that “the Central Government may, in consultation with the National Financial Reporting Authority, by general or special order, direct, in respect of such class or description of companies, as may be specified in the order, that the auditor’s report shall also include a statement on such matters as may be specified therein.”
Accordingly, it may be noted that as when an Order is notified by the Central Government under section 143(11) of the Companies Act, 2013, the members would be required to report thereon as a part of their statutory audit reports.
Until the aforesaid Order is issued, no additional reporting under section 143(11) of the Companies Act, 2013 is required by the Auditors for the financial year 2014-15.
Members are advised to keep a watch on the MCA site (www.mca.gov.in) as well as the ICAI site (www.icai.org) for further announcements in this regard.
CA ABHIJIT BANDYOPADHYAY
Chairman, Auditing & Assurance Standards Board
Note 2 :
FOR THE ATTENTION OF THE MEMBERS
ILLUSTRATIVE FORMATS OF THE INDEPENDENT AUDITOR’S REPORT ON STANDALONE FINANCIAL STATEMENTS UNDER THE COMPANIES ACT, 2013 AND THE RULES THEREUNDER
The Auditing and Assurance Standards Board is issuing the following illustrative formats of the Independent Auditor’s Report on the Standalone Financial Statements under the Companies Act, 2013 and the Rules thereunder. These illustrative formats were approved by the Council of the Institute of Chartered Accountants of India (ICAI) at its Meeting held in November 2014. These illustrative formats would be added to the respective Appendices of Standard on Auditing (SA) 700, Forming An Opinion and Reporting On Financial Statements and Standard on Auditing (SA) 705, Modifications to the Opinion in the Independent Auditor’s Report, issued by ICAI.
Illus. 1 Unmodified Opinion on Standalone Financial Statements, Emphasis of Matter Paragraphs, Reporting on clause 143(3)(i) regarding internal financial controls is required (Click here to see the format)
Will be added to Appendix to SA 700
Illus. 2 Unmodified Opinion on Standalone Financial Statements, Emphasis of Matter Paragraphs, Reporting on clause 143(3)(i) regarding internal financial controls is not required (Click here to see the format)
http://220.227.161.86/35922aasb-illus25437b.pdf
Illus. 3 Qualified Opinion on Standalone Financial Statements, Qualification is quantifiable, Reporting on clause 143(3)(i) regarding internal financial controls is not required (Click here to see the format)
Will be added to Appendix to SA 705
Illus. 4 Qualified Opinion on Standalone Financial Statements, Qualification is not quantifiable, Reporting on clause 143(3)(i) regarding internal financial controls is not required (Click here to see the format)
Illus. 5 Adverse Opinion on Standalone Financial Statements, Reporting on clause 143(3)(i) regarding internal financial controls is not required (Click here to see the format)
Illus. 6 Disclaimer of Opinion on Standalone Financial Statements, Reporting on clause 143(3)(i) regarding internal financial controls is not required (Click here to see the format)
The Board is in consultation with the Ministry of Corporate Affairs with respect to issues pertaining to the independent auditor’s report on consolidated financial statements under the Companies Act 2013. Accordingly, the illustrative format of the independent auditor’s report on consolidated financial statements under the Companies Act, 2013 will be issued in due course.
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