GOURAB KUNDU

AUDITOR DIRECTOR

&reports

AUDITORS’reports

DIRECTOR AUDITOR

&reports

AUDITOR DIRECTOR

&reports

AUDITORS’ reports•External auditor’s report is prepared on the company’s financial statements and its accompanying notes. •This auditor's report is intended to advise investors, the government, and other users on whether the company’s financial statements have been prepared in accordance with Generally Accepted Accounting Principles (GAAP), •Whether they are free of material misstatement (e.g. free of important and significant errors), and whether they show a true and fair view of the operating results, financial position and cash flows of the company.

AUDITOR DIRECTOR

&reports

AUDITORS’ reports•Section 227 of the Companies Act 1956 deals with the auditor’s report.•Essentially it is of two types: • Clean Audit Report• Qualified Audit Report

•The auditor makes the report to the members of the company on the accounts of the company examined by him.•The accounts include:• Every balance sheet• Profit and loss account• Every other document that is a part of or is

annexed to the balance sheet or the profit and loss account.

AUDITOR DIRECTOR

&reports

AUDITORS’ reports•The auditor establishes the following about the balance sheet and the profit and loss account:• Comply with the necessary accounting

standards• Are in agreement with the books of accounts

and returns.• Comply with the GAAP principles.

•The report also states whether any director is disqualified from being appointed as a company director if such person is already a director of a public company which: (Sec 274)• Hasn’t filled the annual accounts and

returns for any three consecutive years (from 1.04.99)• Has failed to repay its deposit or interest

thereon on due date.

Addressed to the board members

Auditing firm

Date and type of analysis

GAAP principles

Clean audit report

AUDITOR DIRECTOR

&reports

Addressed to the board members

Auditing firm

Date and type of analysis

GAAP principles

Clean audit report

AUDITOR DIRECTOR

&reports

Qualified audit reportAUDITOR

DIRECTOR&

reports

AUDITOR DIRECTOR

&reports

CARO 2003Companies Auditors Report Order 2003

Requirements:•Dubious practices like loan to private companies, sale and purchase transactions by book entries and / or at fictitious prices not open to Normal Audit.

• Investing public lost heavily in some listed companies.

•Daphtary-Sastri Committee recommendations.

AUDITOR DIRECTOR

&reports

CARO 2003

Requirements dispensed with under CARO

•Revaluation of Fixed Assets. •Comment on fair & proper valuation of Inventory.

•Determination of any unserviceable stores and provision for the loss.

•Records for sale and disposal of byproducts and scraps.

•Personal expenses charged to revenue.

AUDITOR DIRECTOR

&reports

What is done by CAROPhysical Verification of Inventory

Loan Transactions with parties covered by Section 301

Internal Control

Transactions (other than Loan) with Parties covered under section 301

Fixed Deposit

Internal Audit System

New Requirements CARODisposal of Substantial part of Fixed

Assets “If a substantial part of the Fixed Assets have been disposed off during the year, whether it has affected going concern”.

Disputed Statutory Dues “In case dues of sales tax / income tax / custom tax / wealth tax / excise duty / cess have not been deposited on account of any dispute, then the amounts involved and the forum where dispute is pending may please be mentioned”.

Default in repayment of dues to FI’s / Banks“Whether the Company has defaulted in repayment of dues to a financial institution or bank or debentureholders ? If yes, the period and amount of default to be reported.”

AUDITOR DIRECTOR

&reports

AUDITOR DIRECTOR

&reports

The Audit and the FirmsAuditors’ Reports leads to the following

utilities:• Effective corporate governance• Impacts the enhancement of shareholders’

and stakeholders’ value.• These reports are supposed to be a bond of

trust for the investors both present and potential.

Some of the largest Auditing Firms are:• Price water house coopers• Deloitte touche tohmatsu• Ernst & young• KPMG

AUDITOR DIRECTOR

&reports

The Auditing FirmsPricewaterhouseCoopers (or PwC) is one of the world's largest professional service firms. It was formed in 1998 from a merger between Price Waterhouse and Coopers & Lybrand, both formed in London.It has grossed worldwide revenues of $28 billion and has its presence in over 150 countries.

KPMG has its global headquarters located in Amstelveen, Netherland. It was incepted in 1987 with the merger of Peat Marwick International and Klynveld Main Goerdeler. Today it runs in over 140 countries.

AUDITOR DIRECTOR

&reports

SIGNIFICANCE and implicationsThe Auditors Report acts as a catalyst towards

ensuring a better quality of financial performance of a company.

It expresses the auditors view on true and fairness of the company in the:

•Balance sheet• Profit in the case of profit & loss account•Cash flow in the case of cash flow statement

It covers opinion, views and comments on certain matters, crucial to functioning of the business and financial performance.

AUDITOR DIRECTOR

&reports

Fallacy at Auditing leads to…•Scandals it the region of manifold sums of

money. Examples would be:• Enron• Satyam Computers• Worldcom

This eventually leads to:• Huge loss to the shareholders (when

disclosures are made)• Countries image where the scandal occurs

also get tarnished in a great deal. The reputation of India Inc. post the Satyam fiasco was a case in point.

DIRECTORS’reports

AUDITOR DIRECTOR

&reports

AUDITOR DIRECTOR

&reports

DIRECTORS’ reportsA report by the board of directors has to be attached to every balance sheet that covers various areas like:• The general state of company’s affairs• Information about the amounts, if any which

it proposes to carry to any reserves in the balance sheet• The amount recommended to be paid by the

way of dividends• Any material changes that might have

occurred between the end of financial period and the date of report• Energy, Technology and foreign exchange

earnings As per Section 217, Companies Act

AUDITOR DIRECTOR

&reports

DIRECTORS’ reportsThe report furnishes information about the changes in the nature of the business of

The company itselfOr

Any of the subsidiary of the company, whether owned fully or partially.

(Generally in the classes of business in which the company has an interest)

•It Should also contain a complete explanation on every adverse remark , qualification and reservation, if any, contained in the auditor’s report.•Reasons for the failure, if any to complete the buy back within the time specified.

AUDITOR DIRECTOR

&reports

Responsibility Statement

Directors’ Responsibility Statement:

• Responsibility of preparation of accounts as per the applicable accounting standards; proper explanation of any material departures.

• Responsibility of having made reasonable and prudent judgments and estimates that give a fair view of the state of affairs and the profit and loss in the Financial year.

• The accounts have been prepared on a going concern basis

AUDITOR DIRECTOR

&reports

Considerations in the reportsThe report should also contain the name of every

employee who:• If employed for the complete financial year, received remuneration of not less than Rs 24 lacs per annum in aggregate• If employed for a part of the financial year, received remuneration not less than 2 lacs per month in aggregate. • If employed for whole year or a part thereof, received remuneration which in aggregate is more than/is at an aggregate rate more than a managing director or a whole-time director or a manager, and holds either by himself or along with his spouse and dependent children, not less than 2% of the equity shares of the company.•Report should specify if any such employee is related to any director or manager of the company, and if so, the name of the director.

Directors’ address

AUDITOR DIRECTOR

&reports

Directors Report

Financial Results

Dividend

Responsibility Statement

Management Discussion And

Analysis

Mandatory Disclosures

According To Section 217

Other Information

AUDITOR DIRECTOR

&reports

Business Perform

ance

Results

Category Wise Turnover

Summarized Profit And Loss

AccountReview Of Performance

AUDITOR DIRECTOR

&reports

Dividend

Given

Interim

Dividend

Final Dividend

Not Given

Regret Due To Conserving

Resources Or Decrease In Profit

AUDITOR DIRECTOR

&reports

Other Information

Report On Corporate

Governance

Research And Development

Share Price Movement Vis-a Vis Sensex

Employee Related

InformationCorporate

Social ResponsibilityInformation

About Subsidiaries

Under Sec 212

AUDITOR DIRECTOR

&reports

Management Discussion And Analysis

Economy And Market

Performance Of Divisions And

Categories

Export BusinessThreats And

OpportunitiesInternal Control

System And Their Adequacy

Thank You

DIRECTOR AUDITOR

&reports