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CA Intermediate · Auditing and Ethics · Special Features of Audit of Different Type of Entities

CA Anil audits Greenfield Ltd, a government company. The Comptroller and Auditor-General (C&AG) has appointed him as statutory auditor. Which statement correctly describes his position?

The auditor of a government company is appointed by the C&AG and must follow the C&AG's directions on conduct of the audit and send a copy of the report to the C&AG. The board cannot direct the audit, and the C&AG's directions cannot be disregarded.

  1. AHe must follow only the directions of the company's board, since the board pays his fees
  2. BHe must comply with the directions issued by the C&AG on the manner of audit and submit a copy of the audit report to the C&AGCorrect
  3. CHe is not required to give any report to the C&AG, which only audits banks
  4. DHe may ignore C&AG directions if they conflict with his professional judgment

Explanation

Under the Companies Act, the statutory auditor of a government company is appointed by the C&AG and must follow the C&AG's directions on how the audit is conducted. A copy of the report goes to the C&AG, who may supplement or comment on the audit. Board directions do not govern, and the C&AG's directions cannot be ignored.

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