ILLUS. 3
ILLUSTRATIVE FORMAT OF INDEPENDENT AUDITOR’S’ REPORT
ON THE
STANDALONE FINANCIAL STATEMENTS OF A COMPANY
UNDER
THE COMPANIES ACT, 2013 AND THE
RULES THEREUNDER
(to be added
to
the Appendix to SA 7051)
Circumstances include the following:
· Audit of a complete set
of standalone general purpose financial statements of a company prepared under the
Companies Act, 2013 financial reporting framework.
· The terms of audit engagement
reflect
description
of management’s responsibility
for the
financial
statements in SA
210,
Agreeing the Terms of Audit Engagement.
· The independent auditor :
Ø Has issued a Qualified Opinion with respect to the true and fair view of the financial statements on account of misstatement of inventories. The misstatement is deemed to be material but not pervasive
to the financial statements.
Ø In addition to expressing an opinion on the true and fair view of the financial statements, the auditor
has
other reporting responsibilities required under the Companies Act 2013 and/or other reg ulatory
requirements. However, the auditor does not have the responsibility to report on internal financial controls pursuant to section 143(3)(i) of the Companies Act 2013.
INDEPENDENT AUDITOR’S’ REPORT
TO THE MEMBERS
OF ABC COMPANY LIMITED Report on the Standalone2 Financial Statements
We have audited the accompanying standalone financial statements
of
ABC COMPANY LIMITED (“the Company”), which comprise the Balance Sheet as
at 31st March,
20XX, the Statement
of Profit and
Loss,
the
Cash Flow Statement, and a summary
of
the significant accounting policies and other
explanatory
information for the year then ended, [in which are incorporated the Returns for the year ended on that
date audited by the branch
auditors of the Company’s
branches at (location
of the branches)]3.
Management’s Responsibility for the Standalone Financial Statements
The Company’s Board of
Directors is responsible for the matters stated in Section 134(5) of the
Companies
Act,
2013
(“the Act”) with respect to
the preparation of these
standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows
of
the Company in accordance with the accounting principles generally accepted in India, including
the Accounting Standards
specified under Section 133 of the Act, read
with Rule
7
of
the Companies
(Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in
accordance with the preparation of the Act for safeguarding the assets
of the Company and for
preventing and detecting
frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design,
1 Standard on Auditing (SA) 705,
Modifications to the Opinion in
The Independent Auditor’s Report.
2Where the Company does not have any requirement
to prepare consolidated financial statements
under the
Companies Act 2013, in the auditor’s report, the term “Standalone financial statements”, wherever appearing,
would be replaced by the term “financial statements”.
3 Where applicable
implementation
and maintenance of adequate internal financial controls, that
were operating effectively for
ensuring the accuracy and
completeness
of the accounting records, relevant
to
the preparation and presentation of the financial statements that give a true and fair view and
are free from
material misstatement, whether due to fraud or error.
Auditor’s’ Responsibility
Our responsibility is to express an opinion on
these standalone financial
statements based on our audit.
We have taken into account the provisions of the Act, the accounting and auditing standards and
matters which are required to be included in the audit report under the provisions of the Act and the
Rules made thereunder.
We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan
and
perform the audit to obtain reasonable assurance about whether the financial statements are free from material
misstatement.
An audit
involves performing procedures to
obtain audit evidence
about
the amounts and
the disclosures
in the financial statements.
The
procedures
selected depend on
the
auditor’s judgment, including the assessment
of
the risks of material misstatement
of the financial statements, whether due to fraud or error. In
making
those risk assessments, the auditor considers internal financial control relevant to the Company’s preparation
of
the financial statements that give a true and
fair view in order to design
audit procedures
that are appropriate in the
circumstances, but
not for the purpose of
expressing an opinion on whether the Company has in place an adequate internal financial control
system over financial reporting and the operating effectiveness
of
such controls. An audit also includes evaluating
the appropriateness
of the accounting policies used and
the
reasonableness
of the accounting estimates made by the Company’s Directors, as well
as evaluating the overall
presentation of the financial statements.
We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on
the
standalone financial statements.
Basis for Qualified
Opinion
The Company’s inventories are
carried in the Balance Sheet at Rs. XXX (As at 31st March
20YY: Rs. YYY).
The
Management has not stated the inventories at the lower
of cost and net realisable value but has stated them solely at cost, which constitutes a departure from the Accounting
Standard - 2 “Valuation of
Inventories”. The Company’s
records indicate that
had the Management stated
the
inventories
at the lower of cost and net realisable value, an amount of Rs. XXX (As at 31st March 20YY: Rs. YYY) would have been required to write the inventories down to their net realisable value. Accordingly, cost
of sales
would have been increased by Rs. XXX (Previous year ended 31st March, 20YY:
Rs.YYY), and income tax, profit for the year and shareholders’ funds would have been reduced by Rs. X, Rs. XX and Rs. XXX, respectively (Previous year ended 31st March, 20YY: Rs.Y,
Rs.YY and Rs.YYY, respectively). This matter was
also qualified in our report/ the report of the predecessor auditors on the financial statements for
the
year ended 31st March 20YY.4
4 Where applicable and only in such case, disclosure of previous year figures is required - Attention of the readers is drawn to the provisions of Standard on Auditing (SA) 710, Comparative Information—Corresponding Figures And Comparative Financial Statements .
Qualified Opinion
In our opinion and to the best of
our information and according to the explanations given to us, except for the
effects of the matter described in the Basis for Qualified
Opinion paragraph above, the aforesaid standalone financial statements give the information
required by the Act in the manner so required and
give a true and fair view in conformity with the accounting principles generally
accepted in India, of the
state of affairs of the Company as at 31st March, 20XX, and its profit/loss and its cash flows for the year ended
on
that date.
Other Matter5
We did not audit the financial statements/information of (number) branches included in the
standalone financial statements
of the Company
whose financial statements / financial information reflect
total assets of Rs. as at 31st March, 20XX and total revenues of Rs. for the year
ended on that date,
as considered in the standalone financial statements. The financial
statements/information of these branches have been audited by the branch auditors whose reports
have been furnished
to us, and our opinion
in so far as it relates to the amounts and
disclosures included
in respect of these branches, is based solely on
the
report of such branch
auditors.
Our opinion
is
not qualified in respect of this matter.
Report on
Other Legal and Regulatory Requirements
As required by Section 143
(3)
of the Act, we report that:
(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.
(b)
Except for the effects of the matter described in the Basis for Qualified
Opinion paragraph
above, in our opinion, proper books of account as
required by law have been kept by the
Company
so far as
it
appears
from our
examination
of those books
[and proper
returns adequate for the purposes of our audit have been received from the branches not visited by
us6].
(c) [The reports on the accounts of the branch offices of the Company audited
under Section 143 (8)
of the Act by branch auditors have been sent to us and have been properly dealt with by us in
preparing this report7.]
(d)
The Balance Sheet, the Statement of Profit and Loss,
and
the Cash Flow Statement dealt with by this Report are in agreement with the books
of account [and with the returns received from the branches not visited by
us8].
(e) Except for the effects of the matter described in the Basis for Qualified Opinion paragraph
above, in our
opinion,
the
aforesaid
standalone
financial statements
comply with
the Accounting
Standards
specified
under Section 133
of the Act,
read with Rule 7 of the
Companies (Accounts) Rules, 2014.
(f) The matter described in the Basis for Qualified Opinion paragraph above, in our opinion, may
have an adverse effect
on the functioning of the Company.
5 Where applicable.
6 Where applicable.
7 Where applicable.
8 Where applicable.
(g) On the basis of the written
representations received from the directors as on 31st March, 20XX
taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 20XX from being
appointed
as a
director in terms of Section
164 (2)
of
the Act.
(h) The
qualification relating to the
maintenance of
accounts and
other
matters
connected
therewith are as stated in the Basis for Qualified
Opinion paragraph
above.
(i) With respect to the other matters to be included in the Auditor’s Report in accordance with
Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information
and according to the explanations given to us:
i. The Company has disclosed the impact of pending litigations
on its financial position in its
financial statements – Refer Note
XX to the financial statements; [or the Company does not
have any pending litigations which would
impact its financial position9]
ii. The
Company
has
made provision,
as required under the
applicable
law
or accounting
standards, for material foreseeable losses,
if
any,
on long-term
contracts including
derivative contracts – Refer Note XX to the financial statements; [or the Company did not
have any long-term contracts including
derivative
contracts for which there
were any material foreseeable losses.10]
iii. There has been no delay in transferring
amounts, required to
be transferred, to the Investor
Education and Protection Fund by the Company {or, following are the instances of delay in transferring amounts, required to be transferred,
to the Investor Education and Protection Fund by the Company or there were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company11}.
For XYZ & Co
Chartered Accountants
(Firm’s Registration
No.)
Signature
(Xxxxx X. Xxxx)
(Designation12) (Membership No. XXXXX)
Place of Signature:
Date:
9
As may be applicable.
10 As may be applicable.
11 As may be applicable.
12 Partner or Proprietor, as the case may be.
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