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WBCHSE HS Commercial Law and Preliminaries of Auditing study materials
WBCHSE HS Commercial Law and Preliminaries of Auditing study resources

WBCHSE HS Commercial Law and Preliminaries of Auditing: Rights, Duties and Liabilities of an Auditor; Audit Report

WBCHSE HS Commercial Law and Preliminaries of Auditing · Work through your exam, one topic at a time.

All guide sections

Rights, Duties and Liabilities of an Auditor; Audit Report

This domain covers the statutory auditor under the Companies Act, 2013, the auditor's legal position and the forms of audit report.

Core rules

  • Rights: access to books of account and vouchers (s143(1)); right to obtain information and explanations; right to receive notice of and attend general meetings (s146); right to remuneration (s142); right to visit branches (s143(8)); and the right to seek professional advice where necessary.
  • Duties: report to members (s143(2)); comply with auditing standards (s143(9)); report fraud (s143(12)) to the Board or audit committee and, in specified cases, to the Central Government; report on internal financial controls; sign the report (s145); and avoid prohibited non-audit services (s144).
  • Liabilities: civil liability for negligence or misfeasance causing loss; criminal liability for false statements or fraud; professional disciplinary action by ICAI; and possible liability to third parties who rely on the report in defined circumstances.
  • Audit report: a written opinion. Types are unmodified (clean), qualified ('except for'), adverse and disclaimer. A qualified opinion is used when misstatement or insufficient evidence is material but not pervasive; adverse when material and pervasive; disclaimer when the auditor cannot obtain sufficient appropriate evidence and the possible effect is material and pervasive.
  • The report normally states the title, addressee, auditor's opinion, basis for opinion, going-concern matters, responsibilities of management and auditor, and signature, place and date. Key audit matters are required for listed companies.

Worked example

An auditor cannot verify a large receivable because confirmations are not received and records are missing. If the possible effect is material but not pervasive, the auditor issues a qualified opinion. If the receivable is so significant that the financial statements as a whole could be misleading, the auditor issues a disclaimer. This follows SA 705's material-and-pervasive test.

Traps

An audit report is not a certificate or guarantee. A qualified opinion is not the same as an adverse opinion. An emphasis-of-matter paragraph is not a qualification. The report date must not precede the date on which sufficient appropriate evidence was obtained.