Matters to be included in the auditor’s report :
As per the Companies (Auditor’s Report) Order, 2015, an auditor should include a statement on the following matters in the auditor’s report on the account of companies covered under this order-
(i) Fixed assets
(a) Whether the company is maintaining proper records, showing full particulars, including quantitative details and situation of fixed assets?
(b) Whether these fixed assets have been physically verified by the management at reasonable intervals?
(c) Whether any material discrepancies were noticed on such verification and if so, whether the same have been properly dealt with in the books of account?
(ii) Inventory
(a) Whether physical verification of inventory has been conducted at reasonable intervals by the management?
(b) Are the procedures of physical verification of inventory followed by the management reasonable and adequate in relation to the size of the company and the nature of its business? If not, the inadequacies in such procedures should be reported.
(c) Whether the company is maintaining proper records of inventory and whether any material discrepancies were noticed on physical verification and if so, whether the same have been properly dealt with in the books of account?
(iii) Granting of loans to certain parties
Whether the company has granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 of the 2013 Act. If so:
(a) whether receipt of the principal amount and interest are also regular, and
(b) If overdue amount is more than Rupees one lakh, whether reasonable steps have been taken by the company for recovery of the principal and interest?
(iv) Internal control system
(a) Is there an adequate internal control system commensurate with the size of the company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services?
(b) Whether there is a continuing failure to correct major weaknesses in internal control system?
(v) Acceptance of deposits
(a) In case the company has accepted deposits, whether the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed there under, where applicable, have been complied with?
(b) If not, the nature of contraventions should be stated.
(c) If an order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal, whether the same has been complied with or not?
(vi) Maintenance of cost records
(a) Where maintenance of cost records has been specified by the Central Government under section 148(1) of the 2013 Act?
(b) Whether such accounts and records have been made and maintained?
(vii) Deposit of statutory dues
(a) is the company regular in depositing undisputed statutory dues (which includes following) with the appropriate authorities:
– provident fund,
– employees’ state insurance,
– income-tax,
– sales-tax,
– wealth tax,
– service tax,
– duty of customs,
– duty of excise,
– value added tax,
– cess and
– any other statutory dues.
(b) If not, the extent of the arrears of outstanding statutory dues as at the last day of the financial year concerned for a period of more than six months from the date they became payable, shall be indicated by the auditor.
(c) If dues have not been deposited on account of any dispute, then the amounts involved and the forum where dispute is pending shall be mentioned in case of following dues:
– income tax,
– sales tax,
– wealth tax,
– service tax,
– duty of customs,
– duty of excise,
– value added tax and
– cess.
(A mere representation to the concerned Department shall not constitute a dispute).
(d) Whether the amount required to be transferred to Investor Education and Protection Fund (IEPF) in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made there under has been transferred to such fund within time.
(viii) Accumulated Losses and Cash Losses
(a) Whether in case of a company which has been registered for a period not less than five years, its accumulated losses at the end of the financial year are not less than fifty per cent of its net worth?
(b) Whether it has incurred cash losses in such financial year and in the immediately preceding financial year?
(ix) Default in repayment of dues
(a) Whether the company has defaulted in repayment of dues to a financial institution or bank or debenture holders?
(b) If yes, the period and amount of default to be reported.
(x) Guarantee for loans taken by others from bank or financial institutions
(a) Whether the company has given any guarantee for loans taken by others from bank or financial institutions, the terms and conditions whereof are prejudicial to the interest of the company.
(xi) Application of term loans
(a) Whether term loans were applied for the purpose for which the loans were obtained?
(xii) Fraud Reporting
(a) Whether any fraud on or by the company has been noticed or reported during the year?
(b) If yes, the nature and the amount involved is to be indicated.
The auditor is also required to give reasons in the auditor’s report:
– If the response to any of the reporting matters is unfavourable or qualified, the auditor’s report shall also state the reasons for such unfavourable or qualified response.
– Where the auditor is unable to express any opinion in response to a particular question, the audit report should indicate such fact together with the reasons why it was not possible to provide a response to such a question.