- Attention of the members is invited to the Statement on Qualifications in the Auditor’s Report (“the Statement”) issued by the Institute in 1981 (revised in 1984 and 2000). The Statement, primarily, contains guidance on the following aspects of an auditor’s report:
- reporting in terms of the requirements of section 227(1A) of the Companies Act, 1956; and
- issuance of qualified/ adverse/ disclaimer of opinion.
In addition, the Statement also deals with other related aspects such as the manner of presenting the opinion in the audit report, directors’ comments on qualifications, separate report to directors, branch audit reports as also some examples of situations giving rise to other than unqualified opinion.
- Members’ attention is also invited to the Auditing and Assurance Standard (AAS) 28, The Auditor’s Report on Financial Statements, issued by the Institute in January 2003. The said AAS, among other things, discusses in details, the fundamental principles and considerations involved in issuing various types of opinions – unqualified, qualified, adverse, disclaimer and emphasis of matter. The Standard also contains illustrations regarding each type of opinion, model audit report, etc.
- The Council of the Institute at its 269th meeting held on July 18 to 20, 2007 considered the status of the Statement vis a vis AAS 28. The Council noted that in terms of the announcement of the Council on the authority attached to the documents issued by the Council, on the issuance of a Standard, any Statement on the corresponding subject automatically stands withdrawn. This position could not be applied in case of the Statement on Qualifications in Auditor’s Report upon issuance of AAS 28 since, as noted in paragraph 1 above, the Statement contains guidance on certain additional aspects such as, reporting under section 227(1A), manner of making qualifications, the directors’ comments on qualifications, separate report to directors and branch audit reports.
- Paragraphs 1.1 to 1.5 of the Statement on Qualifications in Auditor’s Report explain the general principles regarding compliance with section 227 of the Companies Act, 1956, which have become obsolete by now. Also, paragraphs 2.31 to 2.32 of the Statement deal with the reporting under Manufacturing and Other Companies (Auditor’s Report) Order, 1975, which also has become obsolete now. Further, paragraphs 3.1 to 4.10 of the Statement on Qualifications in Auditor’s Report enunciate the principles involved in issuing other than unqualified reports as well as examples of situations that may give rise to other than a unqualified opinion and suggested wordings therefor. The Council is of the view that these aspects have been amply covered in AAS 28 and also that AAS 28 contains sufficient examples of situations giving rise to other than unqualified opinions as well as suggested wordings. Accordingly, the Council has decided to withdraw the Statement on Qualifications in Auditor’s Report except paragraphs 2.1 to 2.30, dealing with report under section 227 (1A) of the Companies Act, 1956.
- The Council further decided to keep the paragraphs 2.1 to 2.30 of the existing Statement and rename the Statement as “Statement on Reporting under section 227 (1A) of the Companies Act, 1956”.
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