![]() ![]() ![]() In June, the regulator clarified that quitting an audit assignment does not absolve a statutory auditor of the responsibility to report fraud noticed during the audit, and that absence of audit documentation and failure to submit audit files to the regulator is clear evidence that the audit is unreliable and invalid. In the recent past, NFRA has made a series of orders and clarifications guiding auditors on how to handle some of the failings in financial statements, and asking them to stay alert, display professional scepticism, and question unsubstantiated assertions of company managements. An adverse opinion, on the other hand, suggests the statements as a whole do not present a true and fair picture or, in essence, are misleading. A qualified opinion suggests the financial statements show a true and fair view of the company’s affairs, except for the factors highlighted. In its 2 November order, NFRA said it began investigating the MAN audit after capital market regulator Sebi made a reference to it.Īn auditor’s adverse opinion is far more serious than a qualified opinion. “The audit engagement partner was required to give an adverse opinion where the effect is material and pervasive," the audit watchdog said. “This (qualification) was not correct as the impact of the grounds for qualification was both material and pervasive," NFRA said, adding the assets and liabilities of the subsidiary constituted about 19% and 29%, respectively, of that of the parent. The order is against the audit partner, and not the audit firm. In a disciplinary order dealing with the FY17 statutory audit of MAN Industries (India) Ltd, a listed company, NFRA said the audit engagement partner ‘qualified’ his opinion on the consolidated financial statements, saying it reflected ‘true and fair view’ except for the effect of non-consolidation of a subsidiary. An additional meeting should be held if other issues need to be addressed.The audit watchdog’s latest prescription is part of its drive to improve the quality of financial statements and statutory audits, as credibility of company accounts is vital for the investment climate in the country. The audit committee should meet at least four times a year in order to review the most recent audit, either in-person or via teleconferencing. The New York Stock Exchange (NYSE) requires that the audit committee include a financial expert, but this qualification is typically met by a retired banker, even though that person's ability to catch fraud may be less than expert. Often, however, a CPA is not available for the audit committee, let alone a member of the board of directors. ![]() Ideally, the chair of the audit committee will be a Certified Public Accountant (CPA). The audit committee works closely with auditors to ensure that company's books are correct and that no conflicts of interest exist between auditors or any outside consulting firms employed by the company. Committee members must sign off on the company's books and take responsibility for any misreporting.Per regulation, the audit committee must include outside board members as well as those well-versed in finance or accounting in order to produce honest and accurate reports.An audit committee is made of members of a company's board of directors and oversees its financial statements and reporting. ![]()
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