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

Sagarmala Ports Ltd, a Government company, received a C&AG direction asking its statutory auditor CA Rohan to report on whether the company has system in place to process all accounting transactions through IT and the implications of any processing outside IT on integrity of accounts. Rohan did not include this in his report as it is not in the main CARO paragraphs. What is the correct position?

Rohan must include a report on the C&AG's directions in his audit report. The Companies Act requires the auditor of a Government company to report on the directions issued by the C&AG, including the IT accounting-system direction. It is not limited to CARO matters and needs no Board consent.

  1. ARohan is right, as only CARO matters need to be reported
  2. BRohan must report on the directions issued by the C&AG, as under the Companies Act the auditor of a Government company must include a report on the directions in the audit reportCorrect
  3. CRohan may report only if the Board consents
  4. DRohan should report it only to the C&AG, not in the audit report

Explanation

Under the Act, the auditor of a Government company is required to report on the directions of the C&AG, including the specific IT-processing matter, in the audit report as part of his other reporting responsibilities. Omitting it because it is outside CARO is a failure. Board consent is not required and it forms part of the audit report.

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