Page 401 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

Disclosure required by Law: Disclosure of information may be required by law under certain circumstances.
Matters involving disclosure often involve legal complexities, and expert legal advice may be needed. The duty
of confidentiality may be challenged if the accountant believes the client has committed an unlawful act or
default, such as tax evasion.
Example Reporting Fraud: As per section 143(12) of the Companies Act, 2013, if an auditor believes that an
offence involving fraud is being or has been committed against the company by officers or employees, they must
report the matter to the Central Government within 60 days.

(CNO-PE.1480) CLAUSE 2
A Chartered Accountant in practice shall be deemed to be guilty of professional misconduct if he
Clause (2): Certifies or submits in his name or in the name of his firm, a report of an examination of financial
statements unless the examination of such statements and the related records has been made by him or by a
partner or an employee in his firm or by another chartered accountant in practice.
Rationale
Restriction: The clause prevents a member from signing a report on a financial statement unless it has been
examined by him, a partner, an employee of his firm, or another practicing chartered accountant.
Purpose: The clause is designed to ensure that the work assigned to the member is completed either directly by
the member or under his supervision before he issues his report.
Exception: An exception is made for examinations conducted by another practicing chartered accountant,
allowing for joint assignments or assistance in examining financial statements by any chartered accountant in
practice.
SA 299 Joint Audit. (Refer Chapter No 1)

(CNO-PE.1500) CLAUSE 3
A Chartered Accountant in practice shall be deemed to be guilty of professional misconduct if he.
Clause (3): Permits his name or the name of his firm to be used in connection with an estimate of earnings
contingent upon future transactions in manner which may lead to the belief that he vouches for the accuracy of
the forecast.
Guidance Note on Accountant’s Report on Profit Forecasts and/or Financial Forecasts 1982
Preparation: A chartered accountant can participate in the preparation of profit or financial forecasts.
Review: The accountant can review these forecasts.
Report: The accountant must clearly indicate in his report the sources of information, the basis of forecasts, and
the major assumptions made in arriving at the forecasts. The accountant should not vouch for the accuracy of
the forecasts.
Projections: The same rules apply to projections made on the basis of hypothetical assumptions about future
events and management actions, even if they are not necessarily expected to occur.
SAE 3400: This Guidance Note is replaced by SAE 3400.Now CA cannot report on forecasts/Projections which
he has prepared.
Guidance Note on Reports in Company Prospectuses (Revised 2019)
Purpose: The Guidance Note relates to the reports required to be issued by chartered accountants in prospectuses
issued by companies for offerings made in India.
Companies Act, 2013: The Guidance Note helps with compliance with the provisions of the Companies Act,
2013 and the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations
2018.
Report: CA should make Reports as per this Guidance Note & Clause 3
Case Study
Projection: A Chartered Accountant issued 97 Projection Statements for certain individuals.
No Verification: The accountant did not verify the basic documents before issuing the statements.

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