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

CA Tanvi, appointed by the C&AG as auditor of Gram Vikas Finance Corporation Ltd (a Government company), finds that the company has not complied with a sector-specific directive of the administrative ministry, though no misstatement arises in the financial statements. She asks how to treat the matter in her report. Which conclusion is most appropriate?

She should report the non-compliance in the audit report where it is a reportable matter, considering it under SA 250 and the C&AG's directions. It need not lead to a qualified opinion if the financial statements are not misstated, and it cannot be omitted or reported only to the ministry.

  1. AOmit it, because compliance with ministry directives is outside the auditor's scope
  2. BQualify the opinion on the financial statements because every non-compliance is a material misstatement
  3. CReport it in the audit report as required, including any directions issued by the C&AG and the impact, since non-compliance with applicable laws is assessed under SA 250 and the report requirementsCorrect
  4. DReport it only to the ministry and not in the audit report, to preserve confidentiality

Explanation

The auditor of a Government company considers non-compliance under SA 250 and reports matters required by the Companies Act and the C&AG's directions. A qualification is not automatic when no misstatement arises, so option B is wrong. The matter cannot be omitted or restricted to the ministry, because the audit report is the formal channel.

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