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

Sagar Heavy Machines Ltd., a Government company, has its statutory auditor appointed by the Comptroller and Auditor General of India (C&AG) under the Companies Act, 2013. While finalising the audit, the engagement partner wonders about the C&AG's powers in relation to this audit. Which statement is correct?

The C&AG can conduct a supplementary or test audit of a Government company's accounts after the statutory auditor submits the report. The C&AG appoints the auditor and directs the manner of audit, but retains a continuing oversight role and does not fix or approve the audit fee.

  1. AThe C&AG may direct the manner in which the statutory auditor conducts the audit and give directions on it
  2. BThe C&AG has no role once the auditor is appointed, since the auditor reports only to the members
  3. CThe C&AG can conduct a supplementary audit or test audit of the company's accounts after the statutory auditor's report is submittedCorrect
  4. DThe C&AG must approve the audit fee payable to the statutory auditor under the Companies Act

Explanation

For a Government company, the C&AG appoints the statutory auditor, may direct the manner of audit, and may conduct a supplementary or test audit after the auditor's report. Option A is partly true (the C&AG directs the manner), but the question asks for the correct statement and both A and C look plausible only on a careless reading: the C&AG's directions concern the manner in which accounts are audited, not the conduct of the audit as a whole, hence the clearer statement is C. Option B is wrong because the C&AG retains a continuing role, and the fee is fixed by the company in general meeting, not approved by the C&AG.

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