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

CA Meera is appointed auditor of Sundaram Charitable Trust, a public charitable trust registered under the Maharashtra Public Trusts Act. Which of the following is the correct audit response when she begins the engagement?

The auditor should read the trust deed and the applicable trust law and regulations first. These documents set out the trust's objects, trustees' powers, and how funds must be applied and reported, so they guide the audit. Management representations or a company report format cannot replace this basic step.

  1. AShe should read the trust deed and relevant regulations to understand the objects, the powers of trustees and the applicable reporting requirementsCorrect
  2. BShe should rely on the Companies Act, 2013 audit report format, since all entities must follow it
  3. CShe should skip examining the trust deed because the trustees' representation letter is enough
  4. DShe should limit the audit to cash receipts, since trusts have no expenditure controls

Explanation

For a trust the auditor must study the trust deed, rules and regulations, and the governing statute, because these define objects, applications of funds and reporting. The Companies Act report format does not apply to a trust. A representation letter cannot replace examining the deed, and the audit is not limited to cash receipts.

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