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CA Final · Advanced Auditing, Assurance and Professional Ethics · Overview of Audit of Public Sector Undertakings

CA Meera is the statutory auditor of Bharat Urja Ltd, a Government company, appointed by the C&AG. While completing the audit she finds that the C&AG has issued directions on a specific area of the accounts under the Companies Act. What is the correct action on her part?

The auditor must comply with the C&AG's directions and report on the action taken and its impact on the accounts and financial statements. The directions are binding on the auditor of a Government company and are not optional, nor do they need Board approval.

  1. ATreat the directions as advisory and report only if she agrees with them
  2. BComply with the directions and report on the action taken thereon and its impact on accounts and financial statementsCorrect
  3. CSeek the Board's approval before complying with the directions
  4. DIgnore the directions as the audit is governed solely by Standards on Auditing

Explanation

For Government companies, the C&AG may direct the manner in which accounts are to be audited, and the auditor must act on those directions. The auditor also reports on the action taken and its impact on accounts and financial statements. Option A is wrong because directions are binding, not advisory.

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