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From: 'Ramachandran Mahadevan' via Ludhiana CA <ludhiana-ca@googlegroups.com>
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Sent: Monday, 24 November 2014 4:23 PM
Subject: { Ludhiana-CA:7175 } Fw: Engagement Letter and Auditor's Report Under Section 143 of the Companies Act 2013
From: 'Ramachandran Mahadevan' via Ludhiana CA <ludhiana-ca@googlegroups.com>
To: icai circ <icai_circ_meerut_ca@yahoogroups.com>; "ludhiana-ca@googlegroups.com" <ludhiana-ca@googlegroups.com>; lucknow <Lucknowca_reinvented@yahoogroups.com>; bhilai-ca <bhilai-ca@yahoogroups.com>; taxfin <taxfinsoft@yahoogroups.com>; GLOBAL CA GROUP <globalindianCAs@yahoogroups.com>
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Sent: Monday, 24 November 2014 4:23 PM
Subject: { Ludhiana-CA:7175 } Fw: Engagement Letter and Auditor's Report Under Section 143 of the Companies Act 2013
----- Forwarded Message -----
From: AASB - ICAI <email@icai.ind.in>
To: ramachandran_ca@yahoo.co.in
Sent: Monday, 24 November 2014 12:52 PM
Subject: Engagement Letter and Auditor's Report Under Section 143 of the Companies Act 2013
From: AASB - ICAI <email@icai.ind.in>
To: ramachandran_ca@yahoo.co.in
Sent: Monday, 24 November 2014 12:52 PM
Subject: Engagement Letter and Auditor's Report Under Section 143 of the Companies Act 2013
Dear Professional Colleagues,
As you are all aware, a part of audit of financial statements, compliance with Standard on Auditing (SA) 210, Agreeing the Terms of Audit Engagement, is mandatory. For audits of financial statements of a company the engagement letter under SA 210 have to be in sync with the provisions of the principles of SA 210 as well as the relevant provisions of the Companies Act 2013 and the Rules so that the respective responsibilities of the Directors {specially under section 134(5)} vis a vis responsibilities of the auditors (under section 143), which are incidentally, not exactly similar to that in the Companies Act, 1956. Accordingly, the format of the engagement letter (based on 1956 Act) given in Appendix 1 of SA 210 would need to be suitably modified to adequately capture and document these respective responsibilities.
Similarly, the auditor's report on those financial statements will have to comply with the principles enunciated in SA 700,Forming An Opinion and Reporting on Financial Statements. However, the format of the auditor's report will have to be suitably changed to meet the reporting requirements of section 143(2) and (3) of the said Act and the relevant Rules.
Also, our members would also need guidance on reporting on certain critical requirements of sections 143(3) and 143(12) adequacy and operating effectiveness of internal financial controls as also on reporting of frauds to the Central Government.
The Auditing and Assurance Standards Board of ICAI has taken a number of initiatives to help members in their audit engagements under the Companies Act 2013. These are as follows:
As you are all aware, a part of audit of financial statements, compliance with Standard on Auditing (SA) 210, Agreeing the Terms of Audit Engagement, is mandatory. For audits of financial statements of a company the engagement letter under SA 210 have to be in sync with the provisions of the principles of SA 210 as well as the relevant provisions of the Companies Act 2013 and the Rules so that the respective responsibilities of the Directors {specially under section 134(5)} vis a vis responsibilities of the auditors (under section 143), which are incidentally, not exactly similar to that in the Companies Act, 1956. Accordingly, the format of the engagement letter (based on 1956 Act) given in Appendix 1 of SA 210 would need to be suitably modified to adequately capture and document these respective responsibilities.
Similarly, the auditor's report on those financial statements will have to comply with the principles enunciated in SA 700,Forming An Opinion and Reporting on Financial Statements. However, the format of the auditor's report will have to be suitably changed to meet the reporting requirements of section 143(2) and (3) of the said Act and the relevant Rules.
Also, our members would also need guidance on reporting on certain critical requirements of sections 143(3) and 143(12) adequacy and operating effectiveness of internal financial controls as also on reporting of frauds to the Central Government.
The Auditing and Assurance Standards Board of ICAI has taken a number of initiatives to help members in their audit engagements under the Companies Act 2013. These are as follows:
| Document | Status |
| Guidance Note on Reporting on Internal Financial Controls Over Financial Reporting | Issued. Downloadable from ICAI's website at URL http://220.227.161.86/35671aasbifc734.pdf |
| Guidance Note on Reporting on Frauds to Central Government | Cleared by Council. Under finalization.Will be available in public domain in due course. |
| Revised Illustrative Format of the Engagement Letter for Audit of Financial Statements under Companies Act, 2013 | Cleared by Council. Under finalization.Will be available in public domain soon. |
| Revised Illustrative Format of the Auditor's Report for Audit of Financial Statements under Companies Act, 2013 | Cleared by Council. Under finalization.Will be available in public domain soon. |
I may mention that there are still some open issues in implementation of the provisions of sections 143(3)(i) and 143(12) of the Companies Act 2013. We are in active dialogue with the Ministry of Corporate Affairs on these issues. Once we have clarity from them on these issues, if required, we will revise the guidance given in these Guidance Notes.
I would request the members to please keep at watch on ICAI's website at www.icai.org for the impending release of the last three documents mentioned above.
Warm regards
(CA ABHIJIT BANDYOPADHYAY)
Chairman, Auditing & Assurance Standards Board
The Institute of Chartered Accountants of India
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