New and Revised Auditors’ reporting standards (w.e.f. accounting periods starting 01/04/2018)

[CA GOPAL JI AGRAWAL]

THRE IS PARADIGM SHIFT IN INDEPENDENT AUDITOR’S REPORT [IAR}

The role of statutory auditors is getting enhanced importance in this new era of global economy. Enhanced reporting by auditors is enlarging the utility of the reports for the stakeholders siting around the world. My friends in the CA fraternity in India would be delighted to know that India is at par internationally so far as the Engagement Standards (presently 45 such standards) are concerned. These Engagement Standards have been classified into four category in accordance with the nature, responsibility and type of assurance extended by the chartered accountants. These categories along-with their numbers are as under:

(1) Standards on Auditing (SAs)  - (38)  

(2) Standards on Review Engagements (SREs) – (2)                             

(3) Standards on Assurance Engagements (SAEs) –(3)  and ;

(4) Standards on Related Services (SRSs) –(2)

The Independent Auditor’s Report which is the only communication between the auditors and the various stakeholders/users is witnessing a historic change when we are conducting the audit for the financial year 2018-19 as number of reporting standards which are the foundation of any audit report have been revised with effect from accounting periods starting from April 1, 2018 i.e. in most of the cases for the financial year ending March 2019. Probably we would have missed the flavor of it when concluded bank audit engagements as these reports were readily available by the banks through their SCAs. The following standards have been revised:

1. Standard on Auditing 299 – Joint Audit of Financial Statements (FSs)
2. Standard on Auditing 700 – Forming an opinion on FSs (Clean opinion)
3. Standard on Auditing 705- Modification to the opinion in IAR  (qualified, adverse and disclaimer)
4. Standard on Auditing 706 – Emphasis of Matter and other matter paragraph (MP/OMP)
5. Standard on Auditing  720 – Auditors’ responsibilities relating to other information
6. A new Standard on auditing has been issued i.e. 701 – Communicating Key Audit Matters (KAM)

The days have gone when the auditors used to copy the templates of the auditors reports from preceding years. Since 2013, every year the reporting standards and other enhancements are taking place and I can merely call it an accidental event if the auditors miss the track of these changes.

Though I most humbly urge my fellow colleagues in the attestation job to kindly go through these revised standards which are the parental standards more particularly SA 700 & 705 while issuing any audit report nevertheless just for saving the time and broader approach, five types of reports have been drafted by me which I believe will be of immense use for the  members of CA fraternity while they will finally draft their reports under difference categories of reporting companies BUT in case of ONLY CLEAN OPINION.

Suggested Independent Audit Report (IAR) templates under different situations:

1.     For Private Limited Company without IFC and CARO and Cash Flow

2.     For Private Limited Company with IFC and CARO and Cash Flow

3.     For Private Limited Company with CARO with Cash Flow but without IFC

4.     For Private Limited Company with Cash Flow but without CARO and IFC

5.     For Limited Company - Stand Alone

(Templates as edited)

SNAPSHOT FOR APPLICABILTY OF VARIOUS PROVISION WITH REGARD TO DIFFERENT INDEPENDENT AUDITORS REPORT

COMPANIES EXEMPT FROM IFC, CARO AND CASH FLOW STATEMENTS - PRIVATE LIMITED ONLY

 

REPORT ON IFC SHALL NOT APPLY  IF

1. One person company (OPC) and small company. Small company means a private company having paid up share capital not exceeding 50 lac AND turnover not exceeding 200 lac (turnover of immediately preceding financial year to be seen)
2.  Turnover less than ₹ 50 crores AND aggregate borrowings from banks, financial institutions and body corporate at any point of time during the financial year less than 25 crore

 

CASH FLOW STATEMENT (MAY NOT BE INCLUDED)

OPC, Small, dormant and start up company

 

CARO 2016 REPORT NOT REQUIRED

1. Banking, insurance, OPC, small company
2. Private company not being subsidiary or holding of a public company
3. Private company -paid up capital, reserves and surplus not exceeding 100 lac as on balance sheet date AND borrowings from banks and financial institutions not exceeding 100 lac at any time during the financial year AND total revenue not exceeding 10 crore

Companies (Auditor's Report) Order, 2016

 

Looking for the valuable feedback from the esteemed readers!

 

Discussions to this article

[Rajender Gupta]

Thanks sir for your valuable article

[Chandravijay Shah]

Out of range of SAs, say, 700-799 being Audit Conclusions and Reporting, why only a few of them are listed and made applicable and not all of them? Which are the balance SAs in that range?

Do all SAs apply to all Companies and wef which FY?

[Chandravijay Shah]

In 1st and other Templates, instead of Heading of "Management’s Responsibility for the Financial Statements", should it be "Responsibilities of Management and Those Charged with Governance for the Financial Statements"?