NFRA’s Enforcement Actions Against Branch Auditors of Non-Banking Financial Company
- News|Blog|Account & Audit|
- 2 Min Read
- By Taxmann
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- Last Updated on 4 October, 2023
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A Ltd. (herein referred to as “the company”) is required to appoint Statutory Auditor under Section 139 of the Companies Act by the members at an annual general meeting. The company in its annual general meeting has appointed ABC & Co. as statutory auditor of the Company to audit the accounts of all the Company’s offices including those of its zonal/regional and branch offices for the financial year. No other Branch Statutory Auditors were appointed by the Company in the said meeting. Thus, the shareholders of the company approved only one Statutory Auditor (i.e. ABC & Co.) for the Company and its branches. While investigating the audit file of statutory auditors, NFRA has observed that the audit report of the company includes the reports issued by independent branch auditor. The following are the key points that an auditor must keep in mind while accepting an audit engagement-
- While accepting the audit engagement/appointment letter, the auditor shall verify the requirements prescribed under the section 225 of the Companies Act, 1956 (equivalent Sections being Section 139 & 140 of Companies Act, 2013).
- The auditor shall exercise due diligence and ascertain from the Company whether the requirements of Sections 139 of the Act in respect of such appointment have been duly complied with.
- The auditor shall examine whether the engagement letter contains a proper description of the objective of the audit, the responsibilities of the auditor and the management and the applicable financial reporting framework.
- Oral explanations by the auditor, on their own, do not represent adequate support for the work auditor performed or conclusions the auditor reached, but may be used to explain or clarify information.
- Auditor must assemble the audit file with 60 days from the auditor’s report.
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