Page 16 - CA Inter Audit PARAM

CA Ravi Taori

QNO— Whether Overall Objective Covers Safety of Money ? New Course – (SM25/M24R)
200.005 Bhaskar CNO - SA200.020

Lalji Bhai has purchased shares of a company listed on NSE. The audited financial statements of the
company provide picture of healthy financial performance having robust turnover, low debt and
good profits. On above basis, he is absolutely satisfied that money invested by him is safe and there
is no chance of losing his money. Do audited results and audit reports of companies provide such
assurance to investors like Lalji Bhai? Is thinking of Lalji Bhai correct
OR
M Motors Ltd is a leading Indian automobile manufacturer with many offerings across commercial,
passenger and electric vehicles. The Company is pioneering India’s electric vehicle transition and
enjoys considerable advantage in one of the fastest growing automotive markets.

GR & Associates have been appointed as its statutory auditors for financial year 2022-23. J and K are
newly appointed audit assistants in the firm and are part of engagement team constituted for
purpose of audit of M Motors Ltd. However, they are confused about what such an audit tends to
achieve. They perceive audit as a guarantee against possible errors or frauds in financial statements.
Do you agree with perception of both the assistants? In this context, outline objectives of an
independent audit conducted in accordance with Standards on Auditing.
Answer As per SA 200 “Overall Objectives of the Independent Auditor”, in conducting audit of financial statements,
the overall objectives of the auditor are:

- To obtain reason able assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, thereby enabling the auditor to express an
opinion on whether the financial statements are prepared, in all material respects, in accordance
with an applicable financial reporting framework; and

- To report on the financial statements, and communicate as required by the SAs, in accordance
with the auditor's findings.

An audit does not provide assurance to investor in shares regarding safety of his money. Share prices of
securities are affected by range of factors. Auditor is not expected to perform duties which fall outside
domain of his competence. Hence, thinking of Lalji Bhai is not correct.
Author’s Note :- In MTP they have explained different definition parts further in 1-2 lines like reasonable
assurance, causes of misstatement, materiality, written reports etc. Such explanation was not in ICAI SM
Answer, you can write if time permits.

Overall Objective & Purpose- Auditor doing audit of Old Course -- (N16M/M17R/N17R/N19R/M21R/
QNO FST SM17/M19R/SM20/SM21/M20R/SM21
200.01 Bhaskar CNO SA200.020 /M22E/M23M/N23R)
New Course—(J25R)
Explain the overall objective of the auditor as contained in SA 200.

OR

"RST Ltd., a retail company, has set up internal controls requiring all invoices to be stamped and signed by
an authorised person in “Goods Receiving Section” of the company stating the date and time of receiving

goods in premises to ensure that only those purchase bills are produced for payment for which goods
have been actually received.

During the audit, the auditor finds that two employees – a purchasing manager and an accounts clerk –
have worked together to bypass this control, submitting fake invoices that resulted in payments for goods
that were never received. You are required to state the objectives of an audit, as per SA 200, when it
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