Certification of Accounts
Mandate of the Comptroller and Auditor General in regard to the audit of Government companies
As per section 19 of the Act, the duties and powers of the Comptroller and Auditor General in relation to the audit of accounts of Government companies shall be performed and exercised by him in accordance with the provisions of the Companies Act, 2013.
Application of prescribed accounting standards
The Accounting Standards (AS)/Indian Accounting Standards (Ind AS), auditing standards, guidance notes etc. issued by the Central Government/Institute of Chartered Accountants of India (ICAI) should be kept in view while carrying out the audit of Government companies or any other company. The statutory auditor shall comply with all the regulatory and statutory requirements while reporting audit results.
Responsibility with reference to annual accounts
While the statutory auditor is responsible for forming an expressing an opinion on the annual accounts of the Government Company or any other company, the responsibility for their proper preparation is that of the management of the company. The audit if the annual accounts does not relieve the management of its responsibilities relating to the maintenance of adequate accounting records, internal controls and safeguarding the assets of the company.
Role of the Comptroller and Auditor General with regard to audit by statutory auditor
The Comptroller and Auditor General is authorised to direct the manner in which the statutory auditor shall audit the accounts of Government company or any other company and to give to such auditor directions. The statutory auditor shall submit a copy of his report to the Comptroller and Auditor General and which shall, among other things, include the directions, if any, issued by the Comptroller and Auditor General, the action taken thereon and its impact on the accounts and financial statements of the company. The Comptroller and Auditor General shall within sixty days from the date of receipt of the above audit report have a right to: (1) conduct a supplementary audit of the financial statement of the company; and (2) comment upon or supplement such audit report.
Documentation by statutory auditor
The statutory auditor shall document, in the form of working papers, matters which are important in providing evidence that the audit has been carried out in accordance with the accounting, auditing and assurance standards prescribed by the Central Government/ICAI and the directions of the Comptroller and Auditor General.
Preparation of audit report by the statutory auditor
On completion of audit, the statutory auditor shall prepare his audit report under the Companies Act, 2013 and submit a copy to the Accountant General (Audit).
Communication of matters of Governance to Audit
The statutory auditor, at the time of submission of his report under the Companies Act, 2013, shall also forward to the Accountant General (Audit) a copy of any communication containing matters of governance issued by him to the management of the company in compliance with the relevant accounting, auditing and assurance standards prescribed by Central Government/ICAI.
Responsibilities of Statutory auditor vis-à-vis Accountant General (Audit)
The statutory auditor shall also:
(1) make himself available for discussions with the office of the Comptroller and Auditor General and the Accountant General (Audit) as and when required;
(2) furnish reply to the provisional comments of the Accountant General (Audit) within three days of issue and, if required, attend the meeting called by the Accountant General (Audit) with the management of the company to discuss the provisional comments;
(3) attend the meetings of the audit committee, if formed, held in pursuance of the Companies Act, 2013;
(4) retain the record of work done by him in the form of working papers with sufficient details so as to support his observations and conclusions for a period of five years unless required for a longer period;
(5) make portions of or extracts from his working papers available to the Accountant General (Audit) in cases where it is considered necessary by Audit to verify the authenticity and correctness of the conclusions drawn in his audit report; and
(6) submit to the Comptroller and Auditor General through the Accountant General (Audit), a report under the Companies Act, 2013in compliance with the directions issued to him.
Duly adopted and audited accounts to be made available to Audit
The company shall make available the Balance Sheet and the Statement of Profit and Loss and any other statements or documents declared under the Companies Act, 2013 to be part of annual accounts duly adopted by the board of directors and audited by the statutory auditor to the Accountant General (Audit) by giving sixty days time for conducting supplementary audit and issue of comments of the Comptroller and Auditor General. Any comments given by the Comptroller and Auditor General upon, or supplement to, the audit report shall be sent by the company to every person entitled to copies of audited financial statements and also be placed before the annual general meeting of the company at the same time and in the same manner as the audit report.
Records of the company to be made available to audit
The company shall expeditiously provide the required books of accounts, vouchers, data, information and other documents to the officers of the Accountant General (Audit) to discharge their duties and functions under the Companies Act, 2013.
Scope of Supplementary Audit
It is the statutory auditor who is primarily responsible for expressing an opinion on the accounts of the company. Supplementary audit of the accounts by the Comptroller and Auditor General is, by its very definition, mainly an instrument of quality control of financial audit of accounts that begins with careful selection of the statutory auditor and continues with the ongoing oversight of his work including review of the conclusions drawn in his audit report. The scope of supplementary audit of annual accounts of a Government company and any other company by the Comptroller and Auditor General shall include an examination of selected accounting records and a review of the audit report of the statutory auditorincluding the opinion expressed by him on the annual accounts of the company.
Comments of the Comptroller and Auditor General under Companies Act, 2013
The significant and material observations made in supplementary audit shall be issued as comments of the Comptroller and Auditor General under the Companies Act, 2013 after due consideration of the views, if any, of the statutory auditor and the management of the company.
Scope of test audit by the Comptroller and Auditor General
As per Section 143 (7) of the Companies Act, 2013, the Comptroller and Auditor General may, in case of any company covered under sub-section (5) or sub-section (7) of Section 139 of the Companies Act, 2013, if he considers necessary, by an order, cause test audit to be conducted of the accounts of such company and the provisions of section 19A of the Comptroller and Auditor General 's (DPC) Act, 1971, shall apply to the report of such test audit. Thus, in addition to the supplementary audit of annual accounts of a Government company or any other company, the Comptroller and Auditor General may conduct test audits during the year. These audits may be compliance audits (covering transactions entered into by the company with a view to examining their regularity, propriety, probity) or performance audits (covering economy, efficiency and effectiveness). The scope of test audit may extend to more than one financial year. The audit shall be conducted in accordance with the Regulations in the relevant chapters.
Appointment of statutory auditor
As per Section 139 (5) and 139 (7) of the Companies Act, 2013 the Statutory Auditors of a Government company or any other company, is to be appointed by the Comptroller and Auditor General. The Comptroller and Auditor General shall appoint the statutory auditor for a financial year through a process of selection as may be prescribed and thereafter, subject to the following Regulations; re-appoint him on year to year basis unless special circumstances warrant appointment for a longer period. The total period of appointment including the initial appointment should not ordinarily exceed four financial years. The appointment shall be subject to such terms and conditions as may be prescribed from time to time and available on Comptroller and Auditor General‘s website.
Termination of appointment before expiry of normal tenure
The General Clauses Act, 1897 provides that the authority having power to make the appointment shall also have power to suspend or dismiss any person appointed. Accordingly, where the statutory auditor is appointed by the Comptroller and Auditor General under Section 139 (5) and 139 (7) of the Companies Act, 2013 or any other Act, the power to remove such auditor, after due administrative process, would also be with the Comptroller and Auditor General. Thus, the Comptroller and Auditor General may terminate the appointment of a statutory auditor before the expiry of the normal tenure of appointment for reasonable and sufficient grounds after following the due administrative process, including giving an opportunity to the statutory auditor to make representation against the premature termination of appointment.
Debar from further appointment in case of serious irregularities
In case serious irregularities are noticed in the discharge of professional duties by the statutory auditor, the Comptroller and Auditor General may, if considered necessary, on the recommendation of a committee appointed by him and after giving due opportunity to the statutory auditor to represent, debar him from further appointment as auditor of a Government company or any other company as covered in Section 139 (5) and 139 (7) of the Companies Act, 2013 for such period as may be considered fit. Comptroller and Auditor General may also, if deemed fit, refer the case, to the ICAI for taking further disciplinary action against the statutory auditor.