Page 27 - CA Inter Audit PARAM

CA Ravi Taori

QNO— Is Proper Disclosure within Scope of Audit ? New Course – (SM25, M24M)
COA.15.50 Bhaskar CNO - C1OC.045
Good deeds Limited is engaged in business of recycling of wastes from dumping rounds of
municipal corporation of Indore to usable manure. It is, in this way, also, helping to make the city
clean.

During course of audit by Zoha & Zoha, a firm of auditors, it is observed by auditors that company
has received a notice from Central Bench of National Green Tribunal for not following certain
environmental regulations involving imposition of hefty monetary penalty on the company. The
company is yet to reply to the notice. The auditors point out that same is not stated in notes to
accounts in financial statements. The company points out that auditors are going beyond scope of
their work. Does such a matter fall within scope of audit?
Answer Proper disclosure of financial information is well within scope of audit.
The following points are included in scope of audit of financial statements: -
(1) Coverage of all aspects of entity
Audit of financial statements should be organized adequately to cover all aspects of the entity
relevant to the financial statements being audited.

(2) Reliability and sufficiency of financial information
The auditor should be reasonably satisfied that information contained in underlying accounting
records and other source data (like bills, vouchers, documents etc.) is reliable and sufficient basis
for preparation of financial statements.

The auditor makes a judgment of reliability and sufficiency of financial information by making a
study and assessment of accounting systems and internal controls and by carrying out appropriate
tests, enquiries and procedures.

(3) Proper disclosure of financial information
The auditor should also decide whether relevant information is properly disclosed in the financial
statements. He should also keep in mind applicable statutory requirements in this regard.

It is done by ensuring that financial statements properly summarize transactions and events
recorded therein and by considering the judgments made by management in preparation of
financial statements.

Since proper disclosure of financial information is well within the scope of audit, the contention of
the company is not correct.

QNO-- Audit Process (Aspects to be covered in audit) Old Course -- (M18R/M19E/N20E/N21R/M18E/M19M)
COA.17 Bhaskar CNO C1OC.100
SWM is proprietorship firm engaged in the manufacturing of different kind of yarns. It sells its finished
products both in the domestic as well as in the international market. The company is making total
turnover of Rs. 30 crores. It has also availed cash credit limit of Rs.. 3 crores from Dena Bank. In the year
2018-19. Proprietor of the firm is worried about the financial position of the company and is under the
impression that since he is out of India, therefore firm might not run well. He approaches an Internal
Auditor about as to what would be covered in Audit. Advise regarding principal aspects (any four) to be
covered in getting accounts audited.

OR

Principal aspects to be considered by an auditor while conducting an audit of final statements of
accounts

OR

State the principal aspects which the statutory auditor should look into before framing an opinion on

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