CA Intermediate · Auditing and Ethics · Nature, Objective and Scope of Audit
CA Anita is the statutory auditor of Bharat Polymers Ltd. for the year ended 31 March. After the audit began, management asked her to also express an opinion on whether the company was 'fit for investment by lenders'. The audit report is to be issued under section 143 of the Companies Act, 2013. Which analysis is correct?
The statutory audit opinion covers whether the financial statements give a true and fair view under the applicable framework. It does not certify future viability or fitness for investment, so such a request lies outside the audit's scope and would be a separate engagement, if permissible at all.
- AShe must accept, because the auditor's opinion covers the overall suitability of the company for lenders
- BShe should refuse the statutory audit because additional work compromises independence in all cases
- CThe statutory audit opinion covers whether the financial statements give a true and fair view in accordance with the applicable framework; an investment-suitability opinion is outside that scope and would be a separate engagement, if at all permissibleCorrect
- DThe statutory audit includes a guarantee of the future viability of the company, so the request is already covered
Explanation
The auditor's objective under SA 200 is to express an opinion on whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework. Assurance about future viability or investment suitability is not part of that objective, and the audit report is not an assurance on the company's efficiency or future viability. Option refusing the audit is wrong because other services are not barred in all cases.
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