Annual account audit

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CS Rajveer Rai, Gurgaon (Querist)
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29 December 2012 Respected expert,

Greeting of the Day!

Sirs plz let me know when annual accounts are said to be audited. Can we say it audited before singing and giving audit report on the same. My further question is when we put annual accounts in board meeting preceding AGM for their approval and signing, is these to be said draft annual accounts or audited annnual accounts and what to write in minutes book....Chairman placed before Board draft annual accounts or audited annnual accounts.

Regards

Guest

Guest (Expert)

04 January 2013 Firstly the books of accounts are prepared then they are finalised and provisional Annual Accounts are prepared. Provisional accounts are laid at Board Meeting for approval of Board. Then once approved they are sent to auditor for opinion there on. Once the opinion of auditor in form of Audit report is received then the accounts are said to be audited.
Hope your queries are clear.

CS Rajveer Rai, Gurgaon

CS Rajveer Rai, Gurgaon (Querist)
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05 January 2013 thank you sir

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Ajay Mishra

Ajay Mishra (Expert)
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06 January 2013 Agree with expert.

Approval of balance sheet and profit and loss account by the Board:

Provisions of section 215 relating to authentication of balance sheet and profit and loss account applies to all companies. Section 215(3) stipulates that the balance sheet and profit and loss account shall be approved by the Board of directors before they are signed on behalf of the Board and before they are submitted to the auditors for their report thereon. It has been clarified by the Department vide letter No. 8/22/(215)/76-CL-V, dated 27-10-1976 that the Board of directors as a whole must consider the annual accounts and approve them before the same are handed over to the statutory auditors. The powers of the Board cannot be delegated to a committee of directors or to only some of the directors.

Ajay Mishra

Ajay Mishra (Expert)
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06 January 2013
Time factor of authentication of accounts and signing by auditors:

Where there is no time gap or very little time gap between the date of approval of accounts under section 215 by the Board of directors of a company and the date of the audit report thereon, the Department is of the view that responsibility for the preparation of the accounts of a company belongs to the directors who have to approve them before the auditors make their report thereon. The Act is apparently silent on when the auditors may commence their work of audit. In other words, it does not clarify whether they have simply to await the directors' report on the accounts or proceed with the audit work in the meantime immediately after their appointment at the last annual general meeting. The auditor's report comes at the end of the audit process and section 215 mentions nothing of the process preceding the preparation of the audit report by the auditors. Further that section 227 of the Act, gives the powers to auditor to access at all times to the books and accounts and vouchers of the company, which amply suggests that they do not have
to remain idle at any time after their appointment as auditors. Subject to the convenience of the company, he may actually commence the checking up of vouchers, etc., and the company may prepare trial balance sheets, etc., which will save time for the auditors in the preparation of their report in due course.
Thus, if the auditor signs the balance sheet on the same date on which the directors have approved it, it may not be inferred from this solitary circumstance that the auditor has not performed the audit efficiently. [DCA Circular No. 7 of 1974, dated 26-4-1974].

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