1. Auditor’s Powers, Duties and Responsibilities
Under the Companies Act, 2013
CA. (Dr.) Gurmeet S. Grewal
B. Com (Hons.), FCA, PhD., CAL (IIAM)
Grewal & Singh Chartered Accountants
Phones: &

2. Reporting by the Company Auditors
For Financial Years starting on or after April 1, 2014
Section 143 of the Companies Act, 2013,
The Companies (Audit and Auditors) Rules, 2014, and
CARO, 2015 would be applicable.
CA. (Dr.) Gurmeet S. Grewal

3. Section 143(1) of the Companies Act, 2013
Every auditor of a company shall
have a right of access at all times to the books of account and vouchers of the company,
whether kept at the registered office of the company or at any other place, and
shall be entitled to require from the officers of the company such information and explanation as he may consider necessary for the performance of his duties as auditor, and
amongst other matters inquire into the following matters, namely:—
CA. (Dr.) Gurmeet S. Grewal

4. Sub-section (12) – Reporting of fraud by auditors.
Scheme of Section 143
Sub – section (1) – Auditor is to make enquiries on six matters stated in the sub-section.
Sub-section (2) – Auditor to report to the members on specified matters.
Sub-section (3) – Auditors Report to state on other matters (as may be prescribed in Rules).
Sub-section (11) – Central Government’s power to ask auditors to report on specified matters.
Sub-section (12) – Reporting of fraud by auditors.
CA. (Dr.) Gurmeet S. Grewal

5. Section 143(1) Auditor is to make enquiries on following six matters:
Whether loans and advances made by the company on the basis of security have been properly secured; and
whether the terms on which they have been made are prejudicial to the interest of the company or its members;
(b) Whether transactions of the company which are represented merely by book entries are prejudicial to the interest of the company;
(c) Whether the company not being an investment company or a banking company whether so much of the assets of the company as consists of shares, debentures and other securities have been sold at a price less than that at which they were purchased by the company;
CA. (Dr.) Gurmeet S. Grewal

6. Section 143(1)
(d) Whether loans and advances made by the company shown by the company as deposits;
(e) Whether personal expenses have been debited to revenue account;
(f) Whether it is stated in the books and documents the company that any shares have been allotted for cash, whether cash has been actually received in respect of such allotment, and if no cash has been so received, whether the position as stated in the accounts books and the balance sheet is correct, regular and not misleading.
The auditor of the holding company has the right of access to the records of all its subsidiary companies insofar as it relates to the consolidation of its financial statements with that of its subsidiaries.
CA. (Dr.) Gurmeet S. Grewal

7. Section 143(2) The Auditor’s Report shall, after
taking into account the provisions of the Act and Rules,
the accounting and auditing standards and
matters which are required to be included in the audit report,
state whether to the best of his information and knowledge, the said financial statements, give a true and fair view of the state of affairs of the company as at the end of its financial year and profit or loss and cash flow for the year.
CA. (Dr.) Gurmeet S. Grewal

8. Section 143(3)(a) The Auditor's Report shall also state:
whether he has sought and obtained all the information and explanations
which to the best of his knowledge and belief were necessary for the purpose of his audit and
if not, the details thereof and the effect of such information on the financial statements;
CA. (Dr.) Gurmeet S. Grewal

9. Section 143(3)(b) The Auditor's Report shall also state:
whether, in his opinion,
proper books of account as required by law have been kept by the company so far as appear from his examination of those books and
proper returns adequate for the purposes of his audit have been received from branches not visited by him,
CA. (Dr.) Gurmeet S. Grewal

10. Section 143(3)(c) The Auditors’ Report shall also state:
whether the report on the accounts of any branch office audited under sub-section (8), by a person other than the company’s auditor has been sent to him under the proviso to that sub-section, and
the manner in which he has dealt with it in preparing his report?
CA. (Dr.) Gurmeet S. Grewal

11. Reporting under Section 143(3)(c)
We did not audit the financial statements / information of ….. (number) …… branches included in the standalone financial statements of the Company whose financial statements / financial information reflect total assets of Rs. __________ for the year ended on that date, as considered in the standalone financial statements. The financial statements / information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors.
Our opinion is not modified in respect of this matter.
CA. (Dr.) Gurmeet S. Grewal

12. Reporting under Section 143(3)(c)
We did not audit the financial statements / information of five branches included in the standalone financial statements of the Company whose financial statements / financial information reflect total assets of Rs. XXX, Liabilities of Rs. XXX, Incomes Rs. XXX and Expenses Rs. XXX for the year ended on that date, as considered in the standalone financial statements. The financial statements / information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such branch auditors.
 Our opinion is not modified in respect of this matter.
CA. (Dr.) Gurmeet S. Grewal

13. Reporting under Section 143(3)(c)
We did not audit the financial statements / information of five branches included in the standalone financial statements of the Company whose financial statements / financial information reflect total assets of Rs. XXX, Liabilities of Rs. XXX, Incomes Rs. XXX and Expenses Rs. XXX for the year ended on that date, as considered in the standalone financial statements. The financial statements / information of these branches have been audited by the branch auditors whose reports have been furnished to us. We have considered the observations made by the branch auditors in their report and sought explanations from the company on those matters. Accordingly, the observations of the branch auditors have been dealt with by making necessary changes in the financial statements where considered necessary.
Our opinion is not modified in respect of this matter.
CA. (Dr.) Gurmeet S. Grewal

14. Reporting under Section 143(3)(c)
We did not audit the financial statements / information of five branches included in the standalone financial statements of the Company whose financial statements / financial information reflect total assets of Rs. XXX, Liabilities of Rs. XXX, Incomes Rs. XXX and Expenses Rs. XXX for the year ended on that date, as considered in the standalone financial statements. The financial statements / information of these branches have been audited by the branch auditors whose reports have been furnished to us. The branch auditor of Chennai Branch had given disclaimer of opinion with respect to purchases and sales at the branch as the returns for Sales Tax and VAT were not produced to him for his verification. These returns were provided to us and we have verified the purchases and sales at the Chennai branch. In our opinion in so far it relates to other amounts and also disclosures included in respect of these branches, is based solely on the report of such branch auditors.
Our opinion is not modified in respect of this matter.
CA. (Dr.) Gurmeet S. Grewal

15. Section 143(3)(e) The Auditors’ Report shall also state:
whether, in his opinion, the financial statement comply with the accounting standards?
CA. (Dr.) Gurmeet S. Grewal

16. Section 143(3)(f) The Auditors’ Report shall also state:
the observations or comments of the auditors on financial transactions or matters which have any adverse effect on the functioning of the company,
CA. (Dr.) Gurmeet S. Grewal

17. Guidance Note on Reporting u/s 143(3)(f) of the Companies Act,2013
Observations or comments made by the auditor do not have adverse impact on the working of the company but they may contain matters which might have an adverse effect on the functioning of the company.
If auditor’s report is modified (qualified, disclaimer or adverse ) or there is emphasis of matter and that has any adverse effect on the functioning of the company, then auditor is required to report under this clause after applying his professional judgement.
No reporting will be required if, there are no modification or no matter of emphasis.
CA. (Dr.) Gurmeet S. Grewal

18. Examples of Reporting u/s 143(3)(f)
Basis for Qualified Opinion
The Company’s inventories are carried in the Balance Sheet at Rs. XXX (As at 31st March 20YY: Rs. YYY). The Management has not stated the inventories at the lower of cost and net realisable value but has stated them solely at cost, which constitutes a departure from the Accounting Standard - 2 “Valuation of Inventories”. The Company’s records indicate that had the Management stated the inventories at the lower of cost and net realisable value, an amount of Rs. XXX (As at 31st March 20YY: Rs. YYY) would have been required to write the inventories down to their net realisable value.
Our opinion, in this matter, is modified.
CA. (Dr.) Gurmeet S. Grewal

19. Examples of Reporting u/s 143(3)(f)
Qualified Opinion
In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph above, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31st March, 20XX, and its profit/loss and its cash flows for the year ended on that date.
CA. (Dr.) Gurmeet S. Grewal

20. Examples of Reporting u/s 143(3)(f)
Report on Other Legal and Regulatory Requirements
As required by Section 143 (3) (f) of the Act, we report that:
The matter described in the Basis for Qualified Opinion paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.
CA. (Dr.) Gurmeet S. Grewal

21. Examples of Reporting u/s 143(3)(f)
Basis for Qualified Opinion
The company is in violation of section 135 of the Companies Act, According to this section, 2% of the average net profit of preceding 3 years has to be spent for Corporate Social Responsibility activities. No such amount has been spent on any such activity by the company.
Our opinion is qualified in respect of this matter.
CA. (Dr.) Gurmeet S. Grewal

22. Examples of Reporting u/s 143(3)(f)
Qualified Opinion
In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India of the state of affairs of the company as at 31st March 2015, and its profit/loss and its cash flows for the year ended on that date.
Our opinion, in this matter, is modified.
CA. (Dr.) Gurmeet S. Grewal

23. Examples of Reporting u/s 143(3)(f)
Report on Other Legal and Regulatory Requirements
(f) As required by Section 143 (3) of the Act, we report that:
The matter described in the Basis for Qualified Opinion paragraph above, in our opinion, will not have an adverse effect on the functioning of the Company.
CA. (Dr.) Gurmeet S. Grewal

24. Examples of Reporting u/s 143(3)(f)
Basis for Adverse Opinion
The Company’s financing arrangements expired and the amount outstanding was payable on March 31, 20XX. The Company has been unable to re-negotiate or obtain replacement financing and is considering filing for bankruptcy. These events indicate a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern and, therefore, it may be unable to realise its assets and discharge its liabilities in the normal course of business. The financial statements (and notes thereto) do not disclose this fact.
Our opinion is modified in respect of this matter.
CA. (Dr.) Gurmeet S. Grewal

25. Examples of Reporting u/s 143(3)(f)
Adverse Opinion
In our opinion, because of the omission of the information mentioned in the Basis for Adverse Opinion paragraph, the financial statements do not give the information required by the Companies Act, 2013 in the manner so required and also do not give a true and fair view in conformity with the accounting principles generally accepted in India of the state of affairs of the Company as at 31st March, 20XX, and its profit/loss and its cash flows for the year ended on that date.
CA. (Dr.) Gurmeet S. Grewal

26. Examples of Reporting u/s 143(3)(f)
Report on Other Legal and Regulatory Requirements
(f) As required by Section 143 (3) of the Act, we report that:
The matter described in the Basis for Adverse Opinion paragraph above, in our opinion, will have an adverse effect on the functioning of the Company.
CA. (Dr.) Gurmeet S. Grewal

27. Examples of Reporting u/s 143(3)(f)
Emphasis of Matters
We draw attention to Note Y in the financial statements which indicates that the Company has accumulated losses and its net worth has been fully / substantially eroded, the Company has incurred a net loss/net cash loss during the current and previous year(s) and, the Company’s current liabilities exceeded its current assets as at the balance sheet date. These conditions, along with other matters set forth in Note Y, indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern. However, the financial statements of the Company have been prepared on a going concern basis for the reasons stated in the said Note.
Our opinion is not modified in respect of these matters.
CA. (Dr.) Gurmeet S. Grewal

28. Examples of Reporting u/s 143(3)(f)
Report on Other Legal and Regulatory Requirements
As required by Section 143 (3) of the Act, we report
that:
The going concern matter described in sub- paragraph (b) under the Emphasis of Matters paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.
CA. (Dr.) Gurmeet S. Grewal

29. Examples of Reporting u/s 143(3)(f)
Emphasis of Matters
We draw attention to Note No. … in the financial statements which states that the company has stopped its mining operations on account of exhaustion of clay stock. This segment of operations made significant contribution to revenue and profit in the past years. The company has other operational segments which continue to contribute significant revenue and profit.
Our opinion is not modified in respect of these matters.
CA. (Dr.) Gurmeet S. Grewal

30. Section 143(3)(g) The auditors’ report shall also state:
whether any director is disqualified from being appointed as director under sub-section (2) of section 164 ?
Reporting:
On the basis of written representations received from the directors as on 31st March, 2015 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2015 from being appointed as director in terms of section 164(2) of the Act.
CA. (Dr.) Gurmeet S. Grewal

31. Section 143(3)(h) The auditors’ report shall also state:
any qualification, reservation or adverse remark relating to the maintenance of accounts and other matters connected therewith?
CA. (Dr.) Gurmeet S. Grewal

32. Guidance Note on Reporting u/s 143(3)(h) of the Companies Act, 2013
If auditor’s report is modified (qualified, disclaimer or adverse) and that modification is connected to or leads to books of accounts and/or financial statement prepared there from, then auditor is required to report under this clause.
No reporting will be required if, there are no modifications.
Reporting under ‘Matter of Emphasis’ in terms of SA-706 shall not trigger reporting under this clause.
CA. (Dr.) Gurmeet S. Grewal

33. Example on Reporting u/s 143(3)(h)
Basis for Disclaimer of Opinion
We were appointed auditors of the Company after March 31, 20X1 and thus could not observe the counting of physical inventories at the beginning and end of the year. Accordingly, we were unable to satisfy ourselves by alternative means concerning the inventory quantities held at March 31, 20X0 and March 31, 20X1 which are stated in the Balance Sheet at Rs. XXX and Rs. XXX, respectively.
CA. (Dr.) Gurmeet S. Grewal

34. Example on Reporting u/s 143(3)(h)
In addition, the introduction of a new computerised accounts receivable system in September 20X0 resulted in numerous errors in accounts receivable. As of the date of our audit report, Management was still in the process of rectifying the system deficiencies and correcting the errors. We were unable to confirm or verify by alternative means accounts receivable included in the Balance Sheet at a total amount of Rs. XXX as at March 31, 20X1.
CA. (Dr.) Gurmeet S. Grewal

35. Example on Reporting u/s 143(3)(h)
As a result of these matters, we were unable to determine whether any adjustments might have been found necessary in respect of recorded or unrecorded inventories and accounts receivable in the Balance Sheet, and the corresponding elements making up the Statement of Profit and Loss and Cash Flow Statement.
Opinion
Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial statements.
CA. (Dr.) Gurmeet S. Grewal

36. Example on Reporting u/s 143(3)(h)
Report on Other Legal and Regulatory Requirements
As required by section 143(3) of the Act, we report that:
(h) The reservation relating to the maintenance of accounts and other matters connected therewith are as stated in the Basis for Disclaimer of Opinion paragraph above.
CA. (Dr.) Gurmeet S. Grewal

37. Section 143(3)(i) The Auditor's Report shall also state:
whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls;
Reporting under this clause is postponed to be reported from the financial year beginning April 1, 2015.
CA. (Dr.) Gurmeet S. Grewal

38. (j) such other matters as may be prescribed.
Reporting u/s 143(3)(j)
The Auditor's Report shall also state:
(j) such other matters as may be prescribed.
Rule 11 of the Companies (Audit & Auditors) Rules, 2014 prescribes three additional matters on which auditor is to state his views and comments.
CA. (Dr.) Gurmeet S. Grewal

39. Additional Reporting as prescribed u/s 143(3)(j) read with Rule 11
whether the company has disclosed the impact, if any, of pending litigations on its financial position in its financial statement;
whether the company has made provision, as required under any law or accounting standards, for material foreseeable losses, if any, on long term contracts including derivative contracts; and
whether there has been any delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the company.
CA. (Dr.) Gurmeet S. Grewal

40. Section 143(11)
The Central Government may, in consultation with the National Financial Reporting Authority, by general or special order, direct, in respect of such class or description, as may be specified in the order, that the auditor’s report shall also include a statement on such matters as may be specified therein.
The Central Government has issued CARO, 2015.
CA. (Dr.) Gurmeet S. Grewal

41. CARO, 2015
Applicability.
Matters to be included in the Auditor’s Report under CARO, 2015.
Guidance on CARO, 2015 by MCA and AASB.
CA. (Dr.) Gurmeet S. Grewal

42. Applicability of CARO, 2015
Applies to all companies including a foreign company except:
a banking company,
an insurance company,
a section 8 company,
One Person Company,
Small Company and
Specified private limited company.
CA. (Dr.) Gurmeet S. Grewal

43. Applicability of CARO, 2015 – Specified Private Companies
Does not apply to a private limited company with
a paid up capital and reserves not more than rupees fifty lakh, and
which does not have loan outstanding exceeding rupees twenty lakh from any bank or financial institution, and
does not have a turnover exceeding rupees five crore.
at any time during the financial year.
CA. (Dr.) Gurmeet S. Grewal

44. Section 143(12)
“Notwithstanding anything contained in this section, if an auditor of a company, in the course of the performance of his duties as auditor, has reason to believe that an offence involving fraud is being or has been committed against the company by officers or employees of the company, he shall immediately report the matter to the Central Government within such time and in such manner as may be prescribed.”
CA. (Dr.) Gurmeet S. Grewal

45. CARO, 2015
(xii) whether any fraud on or by the company has been noticed or reported during the year; If yes, the nature and the amount involved is to be indicated.
CA. (Dr.) Gurmeet S. Grewal

46. Fraud- Explanation to Section 447
“Any act or omission, concealment of the fact or abuse of position committed by any person himself or by other person in connivance in any manner, with intent to deceive, to gain undue advantage from or to injure the interest of the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss.”
CA. (Dr.) Gurmeet S. Grewal

47. Frauds Revenue Frauds Tax Frauds Vendor Frauds Sales Fraud
Recruitment Fraud
Management Frauds
Understatement of Liabilities
Employee Embezzlements
Excessive Claims by Employees
Investment Frauds
Bribery
Money Laundering
CA. (Dr.) Gurmeet S. Grewal

48. Reason to Believe and Other Terms
Suspicion- is a state of mind more than ‘speculation’ but short of ‘knowledge’. It is without sufficient evidence.
Reason to Believe- there is sufficient information or convincing evidence to advance beyond suspicion that it is possible someone is committing or has committed a fraud.
Sufficient Reason to Believe- if on evaluation of all the available information and applying appropriate level of skepticism, the conclusion is drawn that fraud is being or has been committed.
CA. (Dr.) Gurmeet S. Grewal

49. SA 240 – Auditor’s Responsibilities Relating to Fraud in an audit of Financial Statements
It is designed to assist the auditor in identifying and assessing the risks of material misstatement due to fraud and in designing procedures to detect such misstatement.
It expands on how the following two SAs are to be applied in relation to risks of material misstatement due to fraud:
SA 315- Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment.
SA 330- The Auditor’s Response to Assessed Risks.
Implementation Guide to Risk Based Audit of Financial Statements should also be referred.
CA. (Dr.) Gurmeet S. Grewal

50. Besides, the auditor, Branch Auditor Joint Auditor Cost Auditor
Section 143(12) - Analysis
Besides, the auditor,
Branch Auditor
Joint Auditor
Cost Auditor
Secretarial Auditor
are also covered.
But, does not include Internal Auditor and Tax Auditor.
CA. (Dr.) Gurmeet S. Grewal

51. in the course of the performance of his duties as auditor…
Attest or non- attest services after April 1, 2014 in the capacity as auditor of the company
Audit of Interim Financial Statements
Limited Review/ Quarterly Financial Result audit
Tax Audit
Issue of Certificates
Though may not be pursuant to any requirement of the Companies Act, 2013 but shall be construed as being in the course of performing his duties as an auditor.
CA. (Dr.) Gurmeet S. Grewal

52. Procedure of Reporting in Rule 13
Not to be reported again by the auditor, if identified and reported by the:
Cost Auditor
Secretarial Auditor
Management through Vigil Mechanism
To be reported only if he is the first person to identify/note such fraud in the course of performance of his duty as auditor
May be required to ensure that proper steps are being taken in that regard.
CA. (Dr.) Gurmeet S. Grewal

53. Companies (Audit and Auditors) Rules, 2014
Rule 13 (5) of Companies (Audit and Auditors) Rules, 2014
The provision of this rule shall also apply, mutatis mutandis, to a Cost Auditor and a Secretarial Auditor during the performance of his duties under section 148 and section 204 respectively.
CA. (Dr.) Gurmeet S. Grewal

54. CA. (Dr.) Gurmeet S Grewal B. Com (Hons.), FCA, PhD., CAL (IIAM)
THANK YOU
CA. (Dr.) Gurmeet S Grewal
B. Com (Hons.), FCA, PhD., CAL (IIAM)
Phones: &
CA. (Dr.) Gurmeet S. Grewal