CA Intermediate · Auditing and Ethics · Audit Report
The auditor of Lotus Foods Ltd, an unlisted company, signs the audit report on the standalone financial statements. Under the Companies Act, 2013 and the Companies (Auditor's Report) Order, which statement about the report is correct?
The report must state whether the company has adequate internal financial controls over financial reporting and whether they operate effectively, unless the company is exempted. This is a Section 143(3) requirement; books of account reporting applies to all companies and the auditor alone signs.
- AThe auditor's report need not state whether proper books of account have been kept, as this is only for listed companies
- BThe report must state whether the company has adequate internal financial controls with reference to financial statements and their operating effectiveness, unless exempted for the companyCorrect
- CThe report must include the auditor's view on the dividend policy of the company
- DThe report must be signed by the company's Managing Director along with the auditor
Explanation
Section 143(3) requires the auditor's report to state, among other matters, whether the company has adequate internal financial controls with reference to financial statements and their operating effectiveness, subject to the exemptions given by notification for certain companies. Reporting on books of account applies to all companies. Dividend policy is not reported on, and the auditor alone signs the report.
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