CMA Intermediate · Corporate Accounting and Auditing · Auditing of Different Types of Undertakings
A statutory auditor of a Government company is conducting an audit under Section 143(5). The company's financial statements show that the company has an inventory of Rs 40 lakh obsolete stock written down to nil, and the C&AG has issued a direction asking the auditor to report whether the company has system of handling of waiver or write off of loans, whether proper records are kept for assets lying with third parties, and how much of the Rs 40 lakh is covered. The auditor finds that obsolete stock was written off with Board approval, but no records of third-party assets exist. Which is the correct approach for the auditor?
The auditor must include in the audit report his reply to the directions issued by the C&AG, including the finding that records of assets with third parties are not maintained. Section 143(5) requires this additional reporting for Government companies, and it is not limited to listed companies.
- AReport on the directions issued by C&AG in the audit report, stating the lack of records for assets with third partiesCorrect
- BIgnore the C&AG directions as they apply only to listed companies and not to Government companies
- CReport the directions only to the C&AG and exclude them from the audit report sent to members
- DQualify the opinion on the true and fair view only, with no separate directions reporting required
Explanation
Under section 143(5), the auditor of a Government company must, in addition to the main report, report on the directions given by the C&AG and on the action taken. Lack of records of third-party assets would be stated in this report. The option stating that directions apply only to listed companies is wrong, as it applies precisely to Government companies. Reporting only to C&AG is incorrect because the report forms part of the audit report.
Did you get it right without looking?
One question tells you little. A timed set on Auditing of Different Types of Undertakings shows your real accuracy, how long you take and where you lose marks.
More Auditing of Different Types of Undertakings questions
- While auditing a charitable trust that receives donations in cash at its temple counters, which procedure gives the auditor the best assuran…
- In the audit of a bank's advances, which procedure gives the auditor the most direct evidence that a loan is properly secured and correctly …
- In the audit of a local body such as a municipal corporation, which feature is most characteristic of the audit compared with a company audi…
- While auditing a co-operative society, the auditor finds that members' loans were granted beyond the limit fixed in the society's bye-laws, …
- In auditing a club's receipts and payments account and income and expenditure account, which statement is correct regarding life membership …
- While auditing a life insurer, the auditor wants assurance on the adequacy of policy liabilities (reserves for future policy benefits). On w…