The Powers and Duties of the Auditor
Chapter Thirty-Four
Syllabus topic none, this is an appendix
Pages 90 to 92 of 98
Block one: the powers, section 143(1)
Every auditor of a company shall have a right of access at all times to the books of account and vouchers of the company, whether kept at the registered office or at any other place, and shall be entitled to require from the officers such information and explanation as he may consider necessary.
| Three rights | |
|---|---|
| Access at all times | Not at appointed times, and not by permission |
| To the books and vouchers wherever kept | The place is irrelevant |
| To require information and explanation | From the officers, and to the extent he considers necessary |
And the proviso extends the access. The auditor of a holding company has a right of access to the records of its subsidiaries and associate companies so far as they relate to the consolidation of its financial statements.
The six matters he must enquire into
Section 143(1)(a) to (f) lists them, and the list is examinable.
| Whether | |
|---|---|
| (a) | Loans and advances made on the basis of security have been properly secured, and whether the terms are prejudicial to the company or its members |
| (b) | Transactions represented merely by book entries are prejudicial to the interests of the company |
| (c) | For a company that is not an investment or banking company, whether shares, debentures and other securities have been sold at less than their cost |
| (d) | Loans and advances have been shown as deposits |
| (e) | Personal expenses have been charged to revenue account |
| (f) | Where shares are stated to have been allotted for cash, whether cash was actually received, and if not whether the position stated in the books and the balance sheet is correct, regular and not misleading |
All six are about the same thing: whether the company's money has been used for the company. Clauses (a), (b), (d) and (f) are all forms of a transaction dressed as something it is not.
Block two: the report, section 143(2) to (4)
Sub-section (2) is the core duty: the auditor makes a report to the members on the accounts examined and on every financial statement to be laid before the company in general meeting, stating whether they give a true and fair view of the state of affairs, the profit or loss and the cash flow.
Sub-section (3) lists what the report shall also state.
| Whether | |
|---|---|
| (a) | He has sought and obtained all the information and explanations necessary, and if not, the details and their effect |
| (b) | Proper books of account as required by law have been kept, and proper returns received from branches not visited |
| (c) | The branch auditor's report has been sent to him and how he dealt with it |
| (d) | The balance sheet and profit and loss account are in agreement with the books and returns |
| (e) | The financial statements comply with the accounting standards |
| (f) | His observations or comments on financial transactions or matters having an adverse effect on the functioning of the company |
| (g) | Whether any director is disqualified under section 164(2) |
| (h) | Any qualification, reservation or adverse remark relating to the maintenance of accounts |
| (i) | Whether the company has adequate internal financial controls with reference to financial statements and their operating effectiveness |
| (j) | Such other matters as may be prescribed |
The rest of this chapter
Module one is free. The rest of this chapter comes with the B.Com. (Accountancy) Semester 3 notes.
You are reading a chapter from a later module. Everything in module one of every subject stays free, and so does the syllabus.
Notes: ₹499 Already bought it? Sign in
Free either way: the syllabus, and module one of every subject.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.