Special Features of Audit of Different Types of Entities
Domain 9 tests whether you adapt the audit to the entity's governing law instead of mechanically applying the Companies Act.
Government companies
The auditor is appointed by the Comptroller and Auditor General of India under Section 139(5). Directions issued under Section 143(5) must be complied with and reported upon. The report is submitted to the C&AG, who may conduct a supplementary audit and comment upon or supplement the report under Section 143(6).
Co-operative societies
Audit is under the State Co-operative Societies Act; the auditor is drawn from a panel approved by the Registrar, and the report goes to the society and the Registrar. Multi-state societies fall under the Multi-State Co-operative Societies Act, 2002.
Charitable and other entities
Charitable trusts are audited under the trust deed and, for tax exemption, Section 12A requirements; the reporting format follows the governing instrument and the Income-tax Act. LLP audits follow the LLP Act, 2008, being mandatory when turnover exceeds 40 lakh or contribution exceeds 25 lakh.
Partnership firms and proprietorships
No statutory audit unless required by the partnership deed or by turnover-based tax audit under Section 44AB; the scope is contractual, so the engagement letter governs.
Worked example
An auditor of a government company receives C&AG directions requiring a specific check on inventory valuation. Reasoning: directions under Section 143(5) are binding; the auditor must perform and report on them, and the report goes to the C&AG, who may supplement it. The auditor cannot simply issue a standard Companies Act report.
Traps
- Applying CARO to a co-operative society or a trust.
- Forgetting the C&AG's supplementary audit role.
- Assuming every partnership requires a statutory audit.
- Missing the LLP audit thresholds.