Auditor and Director Reports

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  • Auditor and Director Reports

    1. 1. AUDITOR DIRECTOR<br />&<br />reports<br />GOURAB KUNDU<br />
    2. 2. AUDITORS’<br />&<br />DIRECTOR AUDITOR<br />reports<br />reports<br />
    3. 3. AUDITORS’ reports<br /><ul><li>External auditor’s report is prepared on the company’s financial statements and its accompanying notes.
    4. 4. This auditor's report is intended to advise investors, the government, and other users on whether the company’s financial statements have been prepared in accordance with Generally Accepted Accounting Principles (GAAP),
    5. 5. Whether they are free of material misstatement (e.g. free of important and significant errors), and whether they show a true and fair view of the operating results, financial position and cash flows of the company.</li></ul>&<br />AUDITOR DIRECTOR<br />reports<br />
    6. 6. AUDITORS’ reports<br /><ul><li>Section 227 of the Companies Act 1956 deals with the auditor’s report.
    7. 7. Essentially it is of two types:
    8. 8. Clean Audit Report
    9. 9. Qualified Audit Report
    10. 10. The auditor makes the report to the members of the company on the accounts of the company examined by him.
    11. 11. The accounts include:
    12. 12. Every balance sheet
    13. 13. Profit and loss account
    14. 14. Every other document that is a part of or is annexed to the balance sheet or the profit and loss account.</li></ul>&<br />AUDITOR DIRECTOR<br />reports<br />
    15. 15. AUDITORS’ reports<br /><ul><li>The auditor establishes the following about the balance sheet and the profit and loss account:
    16. 16. Comply with the necessary accounting standards
    17. 17. Are in agreement with the books of accounts and returns.
    18. 18. Comply with the GAAP principles.
    19. 19. The report also states whether any director is disqualified from being appointed as a company director if such person is already a director of a public company which: (Sec 274)
    20. 20. Hasn’t filled the annual accounts and returns for any three consecutive years (from 1.04.99)
    21. 21. Has failed to repay its deposit or interest thereon on due date.</li></ul>&<br />AUDITOR DIRECTOR<br />reports<br />
    22. 22. Addressed to the board members<br />Date and type of analysis<br />Clean audit report<br />GAAP principles<br />&<br />AUDITOR DIRECTOR<br />reports<br />Auditing firm<br />
    23. 23. Addressed to the board members<br />Date and type of analysis<br />GAAP principles<br />&<br />AUDITOR DIRECTOR<br />reports<br />Clean audit report<br />Auditing firm<br />
    24. 24. &<br />AUDITOR DIRECTOR<br />reports<br />Qualified audit report<br />
    25. 25. CARO 2003<br />Companies Auditors Report Order 2003<br />Requirements:<br /><ul><li>Dubious practices like loan to private companies, sale and purchase transactions by book entries and / or at fictitious prices not open to Normal Audit.
    26. 26. Investing public lost heavily in some listed companies.
    27. 27. Daphtary-Sastri Committee recommendations.</li></ul>&<br />AUDITOR DIRECTOR<br />reports<br />
    28. 28. CARO 2003<br />Requirements dispensed with under CARO<br /><ul><li>Revaluation of Fixed Assets.
    29. 29. Comment on fair & proper valuation of Inventory.
    30. 30. Determination of any unserviceable stores and provision for the loss.
    31. 31. Records for sale and disposal of byproducts and scraps.
    32. 32. Personal expenses charged to revenue.</li></ul>&<br />AUDITOR DIRECTOR<br />reports<br />
    33. 33. What is done by CARO<br />Physical Verification of Inventory<br />Loan Transactions with parties covered by Section 301<br />Internal Control <br />Transactions (other than Loan) with Parties covered under section 301<br />Fixed Deposit<br />Internal Audit System<br />&<br />AUDITOR DIRECTOR<br />reports<br />
    34. 34. New Requirements CARO<br />Disposal of Substantial part of Fixed Assets <br />“If a substantial part of the Fixed Assets have been disposed off during the year, whether it has affected going concern”.<br />Disputed Statutory Dues <br />“In case dues of sales tax / income tax / custom tax / wealth tax / excise duty / cess have not been deposited on account of any dispute, then the amounts involved and the forum where dispute is pending may please be mentioned”.<br />Default in repayment of dues to FI’s / Banks<br />“Whether the Company has defaulted in repayment of dues to a financial institution or bank or debentureholders ? If yes, the period and amount of default to be reported.” <br />&<br />AUDITOR DIRECTOR<br />reports<br />
    35. 35. The Audit and the Firms<br />Auditors’ Reports leads to the following utilities:<br /><ul><li>Effective corporate governance
    36. 36. Impacts the enhancement of shareholders’ and stakeholders’ value.
    37. 37. These reports are supposed to be a bond of trust for the investors both present and potential. </li></ul>Some of the largest Auditing Firms are:<br /><ul><li>Price water house coopers
    38. 38. Deloitte touchetohmatsu
    39. 39. Ernst & young
    40. 40. KPMG</li></ul>&<br />AUDITOR DIRECTOR<br />reports<br />
    41. 41. The Auditing Firms<br />PricewaterhouseCoopers (or PwC) is one of the world&apos;s largest professional service firms. It was formed in 1998 from a merger between Price Waterhouse and Coopers & Lybrand, both formed in London.<br />It has grossed worldwide revenues of $28 billion and has its presence in over 150 countries.<br />KPMG has its global headquarters located in Amstelveen, Netherland. It was incepted in 1987 with the merger of Peat Marwick International and Klynveld Main Goerdeler. Today it runs in over 140 countries.<br />&<br />AUDITOR DIRECTOR<br />reports<br />
    42. 42. SIGNIFICANCE and implications<br />The Auditors Report acts as a catalyst towards ensuring a better quality of financial performance of a company.<br />It expresses the auditors view on true and fairness of the company in the: <br /><ul><li>Balance sheet
    43. 43. Profit in the case of profit & loss account
    44. 44. Cash flow in the case of cash flow statement</li></ul>It covers opinion, views and comments on certain matters, crucial to functioning of the business and financial performance.<br />&<br />AUDITOR DIRECTOR<br />reports<br />
    45. 45. Fallacy at Auditing leads to…<br /><ul><li>Scandals it the region of manifold sums of money. Examples would be:
    46. 46. Enron
    47. 47. Satyam Computers
    48. 48. Worldcom</li></ul>This eventually leads to:<br /><ul><li>Huge loss to the shareholders (when disclosures are made)
    49. 49. Countries image where the scandal occurs also get tarnished in a great deal. The reputation of India Inc. post the Satyam fiasco was a case in point. </li></ul>&<br />AUDITOR DIRECTOR<br />reports<br />
    50. 50. DIRECTORS’<br />&<br />AUDITOR DIRECTOR<br />reports<br />reports<br />
    51. 51. DIRECTORS’ reports<br />A report by the board of directors has to be attached to every balance sheet that covers various areas like:<br /><ul><li>The general state of company’s affairs
    52. 52. Information about the amounts, if any which it proposes to carry to any reserves in the balance sheet
    53. 53. The amount recommended to be paid by the way of dividends
    54. 54. Any material changes that might have occurred between the end of financial period and the date of report
    55. 55. Energy, Technology and foreign exchange earnings </li></ul>As per Section 217, Companies Act<br />&<br />AUDITOR DIRECTOR<br />reports<br />
    56. 56. DIRECTORS’ reports<br />The report furnishes information about the changes in the nature of the business of <br /> The company itself<br /> Or <br /> Any of the subsidiary of the company, whether owned fully or partially. <br /> (Generally in the classes of business in which the company has an interest)<br /><ul><li>It Should also contain a complete explanation on every adverse remark , qualification and reservation, if any, contained in the auditor’s report.
    57. 57. Reasons for the failure, if any to complete the buy back within the time specified.</li></ul>&<br />AUDITOR DIRECTOR<br />reports<br />
    58. 58. Responsibility Statement<br />Directors’ Responsibility Statement:<br /><ul><li>Responsibility of preparation of accounts as per the applicable accounting standards; proper explanation of any material departures.
    59. 59. Responsibility of having made reasonable and prudent judgments and estimates that give a fair view of the state of affairs and the profit and loss in the Financial year.
    60. 60. The accounts have been prepared on a going concern basis</li></ul>&<br />AUDITOR DIRECTOR<br />reports<br />
    61. 61. Considerations in the reports<br />The report should also contain the name of every employee who:<br /><ul><li>If employed for the complete financial year, received remuneration of not less than Rs 24 lacs per annum in aggregate
    62. 62. If employed for a part of the financial year, received remuneration not less than 2 lacs per month in aggregate.
    63. 63. If employed for whole year or a part thereof, received remuneration which in aggregate is more than/is at an aggregate rate more than a managing director or a whole-time director or a manager, and holds either by himself or along with his spouse and dependent children, not less than 2% of the equity shares of the company.
    64. 64. Report should specify if any such employee is related to any director or manager of the company, and if so, the name of the director.</li></ul>&<br />AUDITOR DIRECTOR<br />reports<br />
    65. 65. Directors’ address<br />&<br />AUDITOR DIRECTOR<br />reports<br />
    66. 66. &<br />AUDITOR DIRECTOR<br />reports<br />
    67. 67. &<br />AUDITOR DIRECTOR<br />reports<br />
    68. 68. &<br />AUDITOR DIRECTOR<br />reports<br />
    69. 69. &<br />AUDITOR DIRECTOR<br />reports<br />
    70. 70. Thank You<br />&<br />DIRECTOR AUDITOR<br />reports<br />

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