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

Gramin Seva Trust, a public charitable trust registered in Maharashtra, has appointed CA Meera to audit its accounts for the year. The trust's own deed requires audit but contains no format for the financial statements. Which of the following is the most appropriate step for CA Meera to take regarding the legal framework governing the trust's accounts?

CA Meera should study the trust deed and the applicable state Public Trusts Act and rules to find the accounting and audit requirements. Schedule III applies only to companies, and chartered accountants are fully eligible to audit trusts, so the other approaches are wrong.

  1. ATreat the Companies Act, 2013 Schedule III format as mandatory for the trust
  2. BRefuse the engagement because trusts cannot be audited by chartered accountants
  3. CExamine the trust deed and the applicable state Public Trusts Act and rules to identify the required accounting and audit provisionsCorrect
  4. DRely only on the Income-tax Act provisions and ignore the trust deed

Explanation

The audit of a trust is governed by its trust deed and the relevant state Public Trusts Act and rules, so the auditor must first study these. Schedule III applies to companies, not trusts. Chartered accountants can audit trusts, and ignoring the deed would miss the specific legal requirements.

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