28 October 2012
In the case of a Sinagapore based subsidiary of an Indian Parent company, during the course of statutory audit of subsidiary by Singapore based auditors, it was observed:
1.It’s the first year of operation of the company; 2.there are no multiple bank accounts rather there is a single bank account; 3.books of accounts of the company are properly maintained; 4.bank balances are properly reconciled on a monthly basis,in fact there are no pending entries even as per a single monthly reco,i.e.bank balance as per books & state are duly tallied; 5.all such recos are duly provided to statutory auditors; 6.full bank statements are also provided for audit; 7.not satisfied with above, auditors even themselves verify the transactions appearing in bank statements through online mode (with clients user id & pass);
Even after above, finally auditors decided to qualify the audit report merely due to non-production of bank balance confirmation certificate from bank with following remark:
The company has cash at bank of US$52,483 as disclosed in Note 4 to the financial statements as at 31 March 2012. During the course of our audit and up to date of this report, we were unable to obtain the bank confirmation. In this regard, we were unable to obtain sufficient appropriate audit evidence and carry out alternative procedures to satisfy ourselves on the existence, accuracy and valuation of the balance and possible effects on the financial statements had we obtained the bank confirmation.
In my personal opinion:
1.obtaining the bank balance confirmation certificate from bank is one of the audit procedures & merely non-receipt of such certificate can not make the balance in doubt when all other evidences are available regarding its existance;
2.Even in case of sundry Debtors, Creditors & other balances with third parties, it’s a standard point to put in audit report that-“balances of sundry debtors & creditors are subject to confirmation from parties.” Above point is much lesser impactful than specific qualification written in present case.
3.such qualification not only places the question over the client, but also with the Bank & even the auditors themselves as despite of so many evidences, they are unable to form an opinion whether such balance is existing with bank or not.
4.such uncalled qualification may be taken very seriously by the investors, financers of the company under audit.
Thus, based on above, such qualification should be avoided. PL COMMENT ON ABOVE.
28 October 2012
Your auditor's are correct in making the qualification because certain bank charges will be debtied and they make transfers for any pending loans even in the next month statement. Getting certificate from bank is not a difficult procedure and since it is simple non submission will create doubts whant number of documents you present. Since the certificate is not produced your auditor's qualification is perfectly right and they have discharged their duties with due deligence and care.
28 October 2012
thanks for the reply, but sorry to disagree for following: 1.all the bank states are available & supplied to auditors & balances are duly reconciled; 2.what subsequent transactions client /bank does after the period of audit has no relevance to bank balance as on 31-3-12 (audit period).these are not going to alter the bank balance as on 31-3-12. & for kind info,there are no such pending loans,its a simple current account without any credit facilities,so pl keep the diss limited to applicability without any hypothetical theroies.
CAclubindia
