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Table of Contents
INTRODUCTION................................................................................................. 2
HISTORY OF AUDIT............................................................................................ 2
GENERAL CONSIDERATION IN COMPANY AUDIT................................................6
MATERIALITY AND AUDIT RISK.........................................................................10
OBJECTIVES AND STANDARDS.........................................................................12
AUDIT OF PAYMENT......................................................................................... 16
CONSIDERATIONS IN INITIAL AUDITS...............................................................22
SPECIAL REQUIREMENTS OF COMPANY AUDIT................................................26
AUDIT OF LIABILITIES...................................................................................... 31
CONCLUSION................................................................................................... 34


A company is said to be an artificial person created by law having a separate legal

entity distinct from its shareholders. It cannot be directly managed by its owners, i.e.,

shareholders, because they are very large in number having small holding and also

scattered over a wide area. As such, the management and control of the affairs of the

company is done by other persons generally known as directors. Hence, it becomes

essential for a company to appoint an independent and qualified person, i.e., an auditor,

to verily and certify the truth and fairness of the financial statements.


Clinical Audit was introduced by Florence Nightingale (1855) during the Crimea War

(1853 1855) (Bull 1992). Although the Russians were defeated at the battle of the Alma

River (20 September 1854), the Times newspaper criticized the British medical

facilities. Sidney Herbert, the British Secretary for War asked Florence Nightingale a

mathematician to become nursing administrator and oversee the introduction of nurses

to military hospitals (Porter N. Regional Audit Gleanings Issue 16 May 2005).

Nightingale at the end of the war was able to show positive outcomes from quality of

care. Few other clinicians at this time used audit.


1. Auditors qualifications :

According to section-226 of Companies Act, person or firm having the

following qualification can be appointed as an auditor :

(1) Person who is the member of Institute of Chartered Accountant.

(2) Any firm whose all the partners are serving as chartered accountants in India.

(3) A person holding a certificate under the restricted auditors certificate (part B.

state) rules, 1956 can be appointed as an auditor.

2. Disqualifications of an auditor :

According to section-226(3) of Companies Act, the following person

cannot be appointed as an auditor :

(1) Any registered institute. e.g. Company;

(2) Any salaried officer or employee of the company

(3) Officer of the company, partner of an employee or any person who is serving


(4) A person who is indebted to the company for an amount exceeding Rs.1,000 or

who has provided any security in connection with the indebtedness of any third

person (party) to the company for an amount exceeding Rs.1000 cannot be

appointed as an auditor.

(5) According to section-226(4) of Companies Act, if a person is disqualified with

relation to either a holding company or its sub - Sidiary Company, he shall be

disqualified for being an auditor of the first company.

If an auditor becomes the subject to any of the disqualification mentioned

above, after his appointment, he shall be deemed to have left his rank (position)

as an auditor.Besides provisions of Companies Act, auditor can be disqualified

according to the disqualifications shown in section-8 of Charter Accountants Act,



1. True and fair view : True and fair view in auditing means that the

financial statements are free from material misstatements and faithfully

represent the financial performance and position of the entity - Although the

expression of true and fair view is not strictly defined in the accounting

literature, we may derive the following general conclusions as to its meaning:

True suggests that the financial statements are factually correct and have been

prepared according to applicable reporting framework such as the IFRS and

they do not contain any material misstatements that may mislead the users.

Misstatements may result from material errors or omissions of transactions &

balances in the financial statements. Fair implies that the financial statements

present the information faithfully without any element of bias and they reflect

the economic substance of transactions rather than just their legal form.

-Preparation of true and fair financial statements has been expressly recognized

as one of the responsibilities of the directors of companies in the corporate law

of several countries such as in the Companies Act 2006 in the UK. Auditors

must therefore consider whether directors have fulfilled their responsibility for

the preparation of true and fair financial statements when providing an audit

opinion. Company law of certain jurisdictions require the auditors to expressly

state in their audit report whether in their opinion the financial statements

present a true and fair view of the financial performance and position of the


2.Accounting Policies
The specific policies and procedures used by a company to prepare its financial

statements. These include any methods, measurement systems and procedures

for presenting disclosures. Accounting policies differ from accounting principles

in that the principles are the rules and the policies are a company's way of

adhering to the rules.

Accounting principles are lenient at times, so the policies of a company can be

very important. Looking into a specific company's accounting policies can signal

whether management is conservative or aggressive when reporting earnings.

This should be taken into account by investors when reviewing earnings reports.

Also, outside accountants that are hired to review a company's financial

statements should check the company's policies to ensure they conform to

accounting principles.

3.Internal control

Internal control is under the Board of Director's responsibility. Internal control's

function is, for example, to ensure the efciency and protability of operations,

the reliability of information, and adhering to rules and regulations. Internal

control is a part of day-to-day management and company administration.

An essential part of internal control is the Internal Audit, which operates as a separate

unit under the CEO and reports its observations to the Board of Directors. The

Internal Audit supports the Group's management in directing operations by inspecting

and evaluating the efciency of business operations, risk management and internal

control, and by producing information and recommendations to enhance efciency.

Internal Audit also inspects the processes of business operations and nancial

reporting. Internal Audit's directive has been approved by Stockmann's Board of

Directors. The operations of the Internal Audit are guided by being risk-focused and

emphasising the development of business operations.

4.Audit Approach

The Audit Approach is a risk analysis methodology that focuses on the combined

impact of the environment in which a client operates, the client's management

information and financial results, and the effectiveness of the client's internal controls.

It is based on a thorough, up-to-date understanding of the client's business and

industry, which is obtained through a comprehensive analysis of the external and

internal operating environments. It enables us to design an audit programme that

includes the most effective and efficient combination of test responsive to a client's

unique circumstances. In addition, it provides a uniform method for developing and

documenting the basis for the audit programme.

The Audit Approach enables us to plan our effort to be proportionate to the risk of

material error in specific accounts and transactions. This provides the basis for

planning the minimum effort necessary to limit audit risk in each area to a low level. As

a result, every audit procedure has a specific purpose that is related to the company's

particular situation nothing is "routine" and hence potentially unnecessary. By

following this approach we can avoid over auditing and under auditing, and we can

distribute our audit work more evenly throughout the year.


Professional standards require us to consider materiality and audit risk when planning

the nature, timing and extent of our audit procedures, and when evaluating the results

of those procedures. Materiality is determined at two levels during the initial planning

stage :

1. An overall level as relates to the accounts taken as a whole planning

materiality; and

2. An individual balance or class of transactions level tolerable error.

Audit risk is defined as the risk that an auditor may unknowingly fail to modify his or

her opinion on accounts that are materially misstated. We address materiality and audit

risk at an overall level to help us develop an audit strategy that will provide sufficient

evidence to enable us to evaluate whether the accounts are materially misstated.

At the account balance or class of transactions level, audit risk is the product of the

risks that :

1. Factors in a company's internal or external operating environment, before

considering the functioning of internal controls, will lead to a material error

inherent risk;

2. A material error will not prevented or detected on a timely basis by the system of

internal control control risk; and

3. The auditor's procedures will fail to detect a material error not detected by the

system of internal control detection risk.

The Audit Approach provides a methodology for relating these risk concepts to

materiality and correlating them to the nature, timing, and extent of our audit

procedures. This is accomplished through the Specific Risk Analysis and the

Preliminary Audit Approach.


A companys internal accountants are primarily responsible for preparing financial

statements. In contrast, the purpose of the auditor is to express an opinion on the

assertions of management found in financial statements. The auditor arrives at an

objective opinion by systematically obtaining and evaluating evidence in conformity

with professional auditing standards. Audits increase the reliability of financial

information and consequently improve the efficiency of capital markets. Auditing

standards require that all audits be conducted by persons having adequate technical

training. This includes formal education, field experience, and continuing professional


ACT, 1956

The provisions in the matter of books of account which a company is required to

maintain are contained in section 209 of the Companies Act, 1956. They are briefly

summarised below:

(1) Every company shall maintain at its registered office proper books of account

with regard to :

(a) all sums of money received and expended by the company and the matters in

respect of which the receipts and expenditure take place;

(b) all sales and purchases of goods by the company;

(c) the assets and liabilities of the company; and

(d) in case, it is a company engaged in production, processing, manufacturing or

mining activities, particulars relating to utilisation of material or labour or other items

of cost, provided there is such a requirement by the Central Government in respect of

the class of companies to which it belongs.

N.B. - It is permissible, however, for all or any of the books of account may be kept at

such place in India as the Board of directors may decide but, when a decision in this

regard is taken, the company shall file with the Registrar of Companies a notice giving

full address of the other place.

(2) When a company has a branch office, whether in or outside India, to comply

with the aforementioned provisions, the company must maintain proper books of

account relating to transactions effected at the branch office, also arrange to obtain

from the branch proper summarised returns, at intervals of not more than three

months, for being kept at the registered office or the other place.

(3) For the purposes of sub-sections (1) and (2), proper books of account shall not be

deemed to be kept with respect to the matters specified therein :

(a) if there are not kept such books as are necessary to give a true and fair view of the

state of affairs of the company or branch office, as the case may be, and to explain

its transactions; and

(b) if such books are not kept on accrual basis and according to the double entry

system of accounting.

(4) The books of account and other books and papers shall be open to inspection by

any director during business hours.

4A) The books of account together with vouchers relevant to any entry made therein for

a period of not less than eight years immediately preceding the current year shall be

preserved by the company in goodorder.

(5) If any of the persons referred to in sub-section (6), fails to take reasonable steps to

secure compliance with the requirements of law aforementioned or by a wilful act

causes any default by the company, he shall be punishable for each offence with

imprisonment for a term which may extend to six months or a fine which may extend to

` 10000 or with both. But he may be relieved from such a liability if he can show that he

has reasonable ground to believe that a competent and responsible person was charged

with the duty of seeing that these requirements were complied with and he was in a

position to discharge that duty.

(6) Where the company has a managing director or manager, such managing director


manager and all officers and other employees of the company; and where the company

has neither a managing director nor manager, every director of the company.

(7) If a person, not being a person referred to in the foregoing paragraph, who has


charged with the duty of seeing that requirements of law in regard to the books

of account is complied with, makes a default in doing so, he shall, in respect of each offence,

be punishable with a fine which may extend to ` 10,000.


Managerial Remuneration

The term remuneration covers the following types of expenditure incurred by the

company for its Director or his family

Rent free accommodation;

Any benefit or amenity in respect of accommodation free of charge;

Any other benefit or amenity free of charge at a concessional rate;

Any personal obligation; and

Insurance on the life of, or to provide any pension, annuity or gratuity for, any of

the director or his /her spouse or child.

But the definition is inclusive one. It covers every amount that the company pays or

spends for or for the benefit of a Director, in whatever form and by whatever name.


Section 198 and 309 deals with the provisions relating to managerial remuneration.

The term managerial remuneration mentioned in section 198 and 309 covers the

remuneration of all Directors and also its manager. It is applicable to all public

companies and private company which is a subsidiary of public company. Provisions of

the above mentioned section are not applicable on government companies (within the

meaning of section 619 of the Act).

Ceiling on Managerial Remuneration:

Section 198(1) lays down 11% of net profits of the company computed in the manner as

laid down in section 349 and 350 as the overall ceiling on the total remuneration of the

company. While computing the net profits the remuneration of the Directors shall not

be deducted from the gross profits. The above mentioned limit shall be exclusive of

sitting fees payable to the directors in terms of section 309 (2).

Purchase of Goods: Cash purchases should be verified by reference to cash memos

or receipted invoices by suppliers. Payments made against credit purchases should be

vouched with the receipts issued by the suppliers and the credit to their accounts on the

basis of invoices entered in the Purchases Day book. There must be also evidence of the

goods having been received through an entry in the Goods Inward Books or stock

ledger. It is necessary, however, to make a distinction between a payment for goods and

an advance against supplies to be made in future; the latter should be classified as

advance recoverable in cash or in kind or for value to be received. Since the amount

shown as an advance paid against goods may be only a camouflage for assistance to a

party, it is necessary for the auditor to confirm that the advance was paid pursuant to a

normal trade practice and supplies were, subsequently, received with a reasonable

period of the advance.

Remuneration paid to Directors:

The following points must be considered while vouching the directors remuneration in

case of a public company and private company which is a subsidiary of a public


(i) Examine the Entitlement: The directors are not automatically entitled to

remuneration. It is paid either according to the term of articles of association or in

accordance with a resolution of the general meeting.

(ii) Examine Adherence to Legal Provisions: The auditor should examine adherence

torelevant sections of the Act such as -

Section 309(3) and (4) which deals with manner of payment of managerial


Section 309(2) which deals with payment of listing fees.

Section 198 which has prescribed the overall limit to managerial remuneration.

Schedule XIII to the Act that has laid down conditions for payment of


for companies having profits those having no profits or inadequate profits and

companies having negative effective capital.

Section 310 which provides for increase in remuneration.


1) AUTORIZATION: check article of association, service contract ,minutes of general

meeting to chek authorization of such payment

2) S.227(1A): ensure and enquire that personal expenses are not camouflaged in any

other item as contemplated under section 227(1a)

3) Supporting documents: check the documents to examine the payment


4) CARO 2003: chek the compliance with requirements of CARO 2033


1)A/A: see the article of association of company and note the rules regarding the

payment of commission

2) Agreement : examine the terms and condition of the agreement to find out the rate of

commission payable

3) Compliance: check section 198 and 309 also see calculation as per section 349,350

and 351 of the act

4) calculation :vouch calculation of commission paid and verify with receipt


The return on investment in share is called dividend. It is the part of the profit earned by

the company.

Dividend rate approved in the general meeting by the shareholders .


Following are the important duties of the auditor :

1. Rules Of Company :-

The auditor should check the rules of a company. He should examine that articles of

association and companies ordinance allow the management to propose dividends out of

revenue profits.

2. Rate Of Dividend :-

The auditor should check that rate of dividend must not be above the rate of profit. It

should also not exceed the market rate.

3. Reasonable Profit :-

The auditor should check that amount of revenue profits is reasonable. If it is not

reasonable then dividend should not be paid.

4. Account :-

Dividend amount is payable with in the days. The auditor should check that dividend

account is opened in the bank or not. The amount equal to dividend must be deposited .

5. Tax :-

It is also the duty of the auditor that he should check the tax payable or dividend is paid to

the Govt. or not ? The payment of tax is a legal formality.

6. Not Collected :-

Sometimes shareholders fail to collect the amount from the banks. The auditor should

check such amount because it is stated in the balance sheet as liability.

7. Profit & Loss Account :-

The profit and loss appropriation account must be checked by the auditor. He should note

the amount of dividend recorded in it.

8. Account Statement :-

The auditor examines that amount of dividend paid and due prepares reconciliation

statement of dividend account. He should make detailed checking in case of discrepancy.

The errors can be detected.

9. Warrant :-

To register the shareholder management issues dividend warrants. Such amount can be
claimed by the shareholders from the bank. The auditor should check these warrants has

been issued or not?


The auditor should undertake the following activities before starting an initial audit:

a. Perform procedures regarding the acceptance of the client relationship and the

specific audit engagement; and

b. Communicate with the predecessor auditor in situations in which there has been

a change of auditors in accordance with AU sec. 315, Communications Between

Predecessor and Successor Auditors.

c. . The purpose and objective of planning the audit are the same for an initial

audit or a recurring audit engagement. However, for an initial audit, the auditor

should determine the additional planning activities necessary to establish an

appropriate audit strategy and audit plan, including determining the audit

procedures necessary to obtain sufficient appropriate audit evidence regarding

the opening balances.

The Central Government hereby directs vide General Circular No:

2/2011 (issued by MCA dated 08-02-2011) that provisions of Section 212

shall not apply in relation to subsidiaries of those companies which fulfil the following


(i) The Board of Directors of the Company has by resolution given consent for not

attaching the balance sheet of the subsidiary concerned;

(ii) The company shall present in the annual report, the consolidated financial

statements of holding company and all subsidiaries duly audited by its statutory


(iii) The consolidated financial statement shall be prepared in strict compliance with

applicable Accounting Standards and, where applicable, Listing Agreement as

prescribed by the Security and Exchange Board of India;

(iv) The company shall disclose in the consolidated balance sheet the following

information in aggregate for each subsidiary including subsidiaries of subsidiaries:-

(a) capital (b)reserves (c) total assets (d) total liabilities (e) details of investment

(except in case of investment in the subsidiaries) (f) turnover (g) profit before

taxation (h) provision for taxation (i) profit after taxation (j) proposed dividend;

(v) The holding company shall undertake in its annual report that annual accounts of

the subsidiary companies and the related detailed information shall be made available

to shareholders of the holding and subsidiary companies seeking such information at

any point of time. The annual accounts of the subsidiary companies shall also be

kept for inspection by any shareholders in the head office of the holding company

and of the subsidiary companies concerned and a note to the above effect will be

included in the annual report of the holding company. The holding company shall

furnish a hard copy of details of accounts of subsidiaries to any shareholder on


(vi) The holding as well as subsidiary companies in question shall regularly file such

data to the various regulatory and Government authorities as may be required by


(vii) The company shall give Indian rupee equivalent of the figures given in foreign

currency appearing in the accounts of the subsidiary companies along with exchange

rate as on closing day of the financial year;

(Note: Students may note that as per section 227 of the Act, the duty of the auditor

extends to expressing an opinion on balance sheet and profit and loss account and all

other documents annexed thereto. Since section 212 requires that particulars of

subsidiary company are required to be attached to balance sheet of holding company,

the same shall not be covered by auditors report. Also refer to section 222 which deals

with construction of references to documents annexed to accounts. The Boards Report

under section 217 is also attached to every balance sheet of a company.

Profit and loss account to be annexed and auditors report to be attached to balance

sheet - The profit and loss account shall be annexed to the balance sheet and the

auditors report including the auditors separate, special or supplementary report, if

any shall be attached thereto.


(i) Verification of the constitution and powers - A company can function within the

limits prescribed by the documents on the basis of which it has been registered. It raises

its capital from the public on certain conditions, specified in the Prospectus. Before

commencing business, to purchase a property or to have subscription to its capital

underwritten on this account, it is essential that the auditor, prior to starting the audit

of a company, shall examine:

(a) The Memorandum of Association.

(b) The Articles of Association.

(c) Contracts entered into with vendors and other persons relating to purchase of

property, payment of commission, etc.

A company cannot enter into a contract before it has been registered. What is more, a

public company cannot commence business until the certificate of commencement of

business has been granted to it by the Registrar of Companies. It is, therefore, the duty

of the auditor to take into account, while examining the transaction entered into by the

company, the dates when these were entered into for confirming the validity.

With a view to carrying out the audit effectively, it is necessary that the auditor should

know the authority structure of the company. Under Section 291 of the Act, the Board

of Directors of a company are entitled to exercise all such powers, and to do all such

acts and things, as the

company is authorised to do. However, the Board shall not exercise any power or do

any act or thing which is directed or required by any legislation (including the

Companies Act) or by the memorandum or articles of the company, to be exercised or

done by the company, in general meeting.

Section 292 specifies six types of decisions that can be taken by the Board of Directors

only in Boards meetings. These relate to :

(i) making calls on partly paid shares.

(ii) issue of debentures,

(iii) borrowing monies otherwise than on debentures,

(iv) investing the funds of the company, and

(v) making loans.

The transaction barring the first three can be delegated to any of the following:

(a) a committee of directors,

(b) managing director,

(c) manager,

(d) any other principal officer of the company, or

(e) principal officer of the branch office, in relation to the branch.

Apart from the above, a number of other functions are also carried out by the Board. A

few of such functions are stated herein by way of examples :

(a) Adopting of accounts before the same submitted to the auditor for their report-

Section 215.

(b) Appointment of the first auditors and filling of casual vacancy - Section 224.

(c) Investment in shares of companies within the limits specified in Section 372A.

(d) Entering into contracts with persons who are directors of the company or related to

or associated with the directors as are specified in Section 297 of the Act.

Some of the matters which only the shareholders can sanction at a general meeting :

(a) Appointment and fixation of remuneration of auditors in the annual general

meeting -Section 224.

(b) Declaration of dividends - Regulation 85, Table A.

(c) Appointment of relatives of directors etc. to an office or place of profit in the

company under Section 314 of the Act.

(d) Sale, lease or a disposal of the whole of the companys undertaking or a

substantial part

of it and donations above a certain limits [Section 293(1)].

(ii) Matters which require sanction of the Central Government :

Loans to directors by a company other than a banking or a finance company (Section


For verifying the foregoing transactions and others authorised by the directors or

shareholders, the auditor should refer to the minutes of the meeting at which these have

been considered. Further, for judging the validity or otherwise of section accorded, the

relevant provision of law must be referred to. A few such instances are given below :

(a) Appointment of Directors (Section 256).

(b) Disqualifications of Directors (Section 274).

(c) Conduct of Board Meeting (Sections 285-290).

(d) General powers of Board (Section 291).

(e) Powers which the Board must exercise only at a meeting (Section 292).

(f) Restriction on powers of the Board regarding disposal of the undertaking or part

of it etc. (Section 293).

(g) Prohibitions and restrictions regarding political contributions (Section 293A).

(h) Power of Board and other persons to make contributions to the National Defence

Fund, etc. (Section 293B).

(i) Restriction on advancing loans to Directors, etc. (Section 295).

(j) Restriction on a Director or his relative, a firm in which a director or relative is a

partner; or any other partner of the firm or a private company of which such a director

is a member or director to enter into a contract of sale or purchase of goods except with

the sanction of the Board of Directors (Section 297).

(k) Restriction on an interested director in participating in or voting at Boards

proceedings (Section 300).

(l) Disclosure of interest by directors (Section 299).

(m) Register of contracts, Companies or firms in which directors are inspected

(Section 301)

(n) Remuneration of directors (Section 309).

(o) Restraint on a directors holding offices or places of profit (Section 314).

(p) Restraint on payment of compensation for loss of office to a director (Sections 318

to 321).

(q) Restriction on loans, etc., to companies under the same management (Section 370).

(r) Regulation of inter-corporate loans and investments (Section 372A).


Liabilities reorganization is the concession items made by a creditor in accordance with

the agreement made with a debtor in financial difficulty or rules of the court. There are

four major forms of liabilities reorganization:

1. To confirm whether the date of liabilities reorganization is accurately defined. The fair

market price of assets varies from date to date, the amount of liabilities payable with

interest also varies from each other. Consequently, the profits and losses of liabilities

reorganization and the relevant records of assets and liabilities recognized in different

dates vary from each other. In addition, the date of liabilities reorganization is also the

basis for defining the accounting period. No matter when the assets transactions were

conducted, the reorganization date should be the accounting cut-off date. Auditors, in

carrying out auditing, shall obtain the asset reorganization agreement files in the first

place to identify the date of reorganization. They should then review the accounting

information to check whether the valuation of the assets and liabilities are based on the

reorganization date and the accounting information prepared are within the

corresponding accounting period.

2. To check whether the accounting of the liabilities reorganization is proper. Major tool of

such auditing is to examine on a sample basis the accounting vouchers of liabilities

reorganization. These vouchers are verified against relevant agreement to make sure (1)

relevant assets, liabilities and capital items are consistent with the agreement,- (2)

proper accounting items have been applied and (3) accurate amounts have been

recorded. Special attention shall be paid to see if the capital received and the capital

reserve have been classified accurately, if the bad debt provision of the creditor has

been written off and if contingent expenditures have been given due consideration?

3. To check whether the calculation and recognition of the profits and losses of liabilities

reorganization has been conducted in accordance with relevant requirements. Review

of the calculation of the profits and losses of liabilities reorganization is done through

consulting and examining such information as the reorganization agreement,

information provided by intermediary institutions and market information, the book

value of debtor's liabilities, book value of assets, fair value of assets, fair value of

shareholder's equity, future payables, the creditor's net credit value, future receivables.

The calculation of the profits and losses of the enterprise is then reviewed to make sure

data has been applied correctly and correct calculation has been conducted. Special

attention shall be paid to see if the fair market value of assets, shareholder's equity and

the amount of contingent liabilities have been accurately defined on proper basis and,

whether the accounting period of the profits and losses is appropriate.

4. To audit whether the disclosure of reorganization is sufficient. Accounting

standards require that liabilities reorganization be disclosed in the footnotes of the

financial statements at the end of an accounting period, explaining the contents and

impact of the reorganization. Such disclosure aims to make the user of financial

statements better informed of the financial condition of the enterprise. The user of the

financial statements will not be able to understand the full impact of the

reorganization on the assets and liabilities, profits and losses of the enterprise, nor can

they study the value for money of the enterprise correctly if the disclosure is not

properly made. It is therefore necessary to observe carefully if complete disclosure has

been made by the enterprise through examining the disclosure of the process of

liabilities reorganization.


Every Company registered under Companies Act 1956, need to do its audit every year,
which is known as statutory audit..During the company audit, the auditor discusses his
observations with those charged with governance, such as the audit committee of the
company, before finalising the report. The auditor should be firm in his opinion, and
exercise his independence at this level. This part of the audit is critical, and calls for
resilience on the part of the auditor. An audit report, being a public document, should
be drafted skilfully. The code of conduct prohibits an auditor from divulging any
information received by him in the course of his professional assignment, unless legally
required so to do. Therefore, the auditor shouldn't hesitate to take the help of a legal
expert on whether to include certain comments in his report. And atlast he submit the
reports with adverse , modified or with qualified opnion.