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

Himalaya Power Ltd, a Government company, has its statutory auditor appointed by the Comptroller and Auditor General of India (C&AG). While planning the audit, the engagement partner asks who determines the manner in which the auditor shall conduct the audit of such a company. Which statement is correct?

The C&AG can direct the statutory auditor of a Government company on how the audit is to be conducted, and the auditor must follow those directions. The board, audit committee or ICAI alone do not determine the audit approach in such cases.

  1. AThe C&AG may issue directions to the statutory auditor on the manner in which the company's accounts are to be audited, and the auditor must complyCorrect
  2. BThe company's board decides the audit approach because it pays the audit fee
  3. CThe Institute of Chartered Accountants of India alone prescribes the audit approach and the C&AG has no role
  4. DThe audit committee of the company fixes the audit programme and the C&AG is only informed afterwards

Explanation

For Government companies, the C&AG appoints the auditor and has the power to give directions on how the audit is to be conducted. The auditor must comply with these directions. The board or audit committee cannot dictate the audit approach, so the other options are wrong.

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