Case Studies on NFRA Order | Instances of Inappropriate Reporting under CARO
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- By Taxmann
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- Last Updated on 29 August, 2023
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The internal auditor of the ABC Ltd. herein referred to as “the company” vide their report stated that the management did not carry out any physical verification of Fixed Assets. However, the statutory auditor of the company in their CARO report, reported that “As informed by the management fixed assets have been physically verified by the management during the year.”
The statutory auditor of the company was under the surveillance of the National Financial Reporting Authority (NFRA). The NFRA issued Show Cause Notice to the auditor asking them to submit the audit file. On obtaining the audit file, the NFRA observed that the internal audit report was the part of audit file. Despite of presence of internal audit report which stated the management’s lacking on conduction of physical verification of fixed assets, the statutory auditor negligently reported on existence of fixed assets under CARO report. Thus, NFRA held the auditor guilty of professional misconduct for failure to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement.
To know various other instances of non-reporting under CARO and NFRA’s action against auditor for such non-reporting.
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