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CA Intermediate · Auditing and Ethics · Audit Report

While auditing a private company, Vikas & Co. is required to report on internal financial controls over financial reporting. Under the Companies Act, 2013, which statement about the auditor's report is correct?

The auditor's report must state whether the company has adequate internal financial controls with reference to financial statements and whether they operate effectively. This is a Companies Act requirement under section 143(3)(i), not limited to listed companies, and it does not mean certifying absolute accuracy of every control.

  1. AThe report must state whether the company has adequate internal financial controls with reference to financial statements and their operating effectivenessCorrect
  2. BReporting on internal financial controls is optional for all companies
  3. CReporting applies only to listed companies
  4. DThe auditor must certify the absolute accuracy of all controls

Explanation

Section 143(3)(i) requires the auditor's report to state whether the company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls. Exemptions exist for certain small private companies by notification, but it is not limited to listed companies. Auditors do not certify absolute accuracy.

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