Page 252 - CA Inter Audit PARAM

CA Ravi Taori
It may be noted that auditor’s reporting on internal financial controls is a requirement specified
in
the Act and, therefore, will apply only in case of reporting on financial statements prepared under
the Act and reported under Section 143.
Accordingly, reporting on internal financial controls will not be applicable with respect to interim
financial statements, such as quarterly or half-yearly financial statements, unless such reporting
is
required under any other law or regulation.
In view of above, the given statement is incorrect.

QNO Sec-143(8) & 139 (1)- Appointment of Branch Auditor Old Course--
CoAud.74 Bhaskar CNO – CA.140/CA.360 (P16M/M20R/M21M/SM20/SM21)
During the year 2015-16, it was decided for the first time that the accounts of the branch office of AAS
Company Limited be audited by qualified Chartered Accountants other than the company auditor.
Accordingly, the Board had appointed branch auditors for the ensuing year. One of the shareholders
complained to the Central Government that the appointments was not valid as the Board of Directors
do not have power to appoint auditors, be they Company Auditor or Branch Auditors?
OR
"ABC Ltd is a company incorporated in India. It has branches within and outside India. Explain who can
be appointed as an auditor of these branches within and outside India. Also explain to whom branch
auditor is required to report."
Answer Part I -- Relevant Standards & Laws
▪ Section 143(8) of the Companies Act, 2013
▪ Section 139 (1) of the Companies Act, 2013
▪ Rule 12 of the Companies (Audit and Auditors) Rules, 2014,
Part II -- Requirements of Relevant Standards & Laws
➢ The Companies Act, 2013 leaves it to the company to designate or not to designate any
establishment of the company as 'branch office'. Under the Companies Act, 2013, only
establishment "described as such by the company" shall be treated as a 'branch office'.

➢ Further, as per Section 143(8) of the Companies Act, 2013,
• Where a company has a branch office, the accounts of that office shall be audited either by
• the auditor appointed for the company (herein referred to as the company's auditor)
under this Act or
• by any other person qualified for appointment as an auditor of the company under
this Act and appointed as such under section 139.

• Where the branch office is situated in a country outside India, the accounts of the branch
office shall be audited either by
• the company's auditor or
• by an accountant or by any other person duly qualified to act as an auditor of the
accounts of the branch office in accordance with the laws of that country and the
duties and powers of the company's auditor with reference to the audit of the branch
and the branch auditor, if any, shall be such as may be prescribed.

• It is provided that the branch auditor shall prepare a report on the accounts of the branch
examined by him and send it to the auditor of the company who shall deal with it in his
report in such manner as he considers necessary.

➢ Rule 12 of the Companies (Audit and Auditors) Rules, 2014,
Further as per rule 12 of the Companies (Audit and Auditors) Rules, 2014, the branch
auditor shall submit his report to the company’s auditor and reporting of fraud by the
auditor shall also extend to such branch auditor to the extent it relates to the concerned
branch.

➢ Section 139(1) of the Companies Act, 2013 provides that
www.auditguru.in 8.22