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

CA Kavita is the auditor of Bharat Mutual Benefit Hospital, a partnership firm, and has been asked by the partners to audit it though no statute mandates it. The engagement letter states that the audit is for the partners' use only. Which statement about the auditor's responsibility is correct?

The auditor must still follow the Standards on Auditing and the Code of Ethics and report according to the agreed engagement terms. The absence of a statutory requirement does not relax professional standards, and Companies Act reporting formats do not apply to a partnership firm.

  1. AThe auditor need not follow the Standards on Auditing because the audit is non-statutory
  2. BThe auditor should conduct the audit in accordance with the Standards on Auditing and the Code of Ethics, and report on the matters covered by the agreed terms of engagementCorrect
  3. CThe auditor must give the report in the format required under Section 143 of the Companies Act, 2013
  4. DThe auditor may accept the engagement without any written terms because the audit is voluntary

Explanation

Even when an audit is not required by statute, a chartered accountant must comply with the Standards on Auditing and the Code of Ethics, and the terms should be documented in an engagement letter. The report is framed according to those terms. Companies Act reporting does not apply to a partnership firm.

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