TYPES OF AUDIT :
AUDIT UNDER THE COMPANIES ACT, 2013
Companies Act, 2013 is focused on transparency and disclosure and gives audit its due recognition. In the new Act, attempt has been made to cover each aspect of corporate functioning under audit by prescribing various types of audits like internal audit and secretarial audit.
Statutory Audit
Statutory Audit is often called financial Audit. Independent financial audit is generally conducted to ascertain whether the Balance Sheet and Profit & Loss Account presents a true and fair view of the financial position and working result of the organization under audit. The need for financial audit arises as the control of the company is vested in the hands of the management of the company and the financial statements are also prepared by the management. The owners (shareholders), therefore, need assurance that the financial statements prepared by the management are reliable. The opinion of the auditor – an independent expert – assures the owners about the reliability of the financial statements. Similarly, investors wish to invest their moneys in the shares of companies on the basis of their profitability and financial position. They will also place greater reliance on financial statements if they have been audited. Other users of financial statements, e.g., trade creditors, banks, financial institutions, tax authorities, other government authorities, labour unions, etc., also place greater reliance on audited accounts.
Sections 139 to 147 under chapter X of the Companies Act, 2013 contain provisions regarding statutory audit and auditors. Section 139 contains that at the first annual general meeting every company shall appoint an individual or firm as it auditor who will hold office from the conclusion of that meeting till the conclusion of the sixth annual general meeting. Section 141 contains that a person shall be eligible for appointment as an auditor of a company only if he is a chartered accountant and in case of a firm whereof majority of partners practising in India are qualified for appointment as aforesaid may be appointed by its firm name to be auditor of a company. Section 143 which contains provisions regarding powers and duties of auditors contains that the statutory auditor shall make a report to the members of the company on the accounts and financial statements examined by him. The main provisions regarding statutory audit are:
• Auditor will have access to books of accounts and vouchers etc. at all times and he can seek information from officers of the company as he may deem necessary.
• In his report he must state, besides other things, whether the financial statements represent a true and fair view of the state of company’s affairs as at the end of the financial year.
• In case of any qualifications in the audit report, the reason for same must be stated in the report.
• Auditor is required to comply with Auditing Standards.
• In case auditor suspects any fraud, he must immediately report the same to the Central Government.