IMPORTANT COUNCIL DECISION ON FORMAT OF AUDIT REPORTS

ANNOUNCEMENT

APPLICABILITY OF SA 700, FORMING AN OPINION AND REPORTING ON FINANCIAL
STATEMENTS, TO FORMATS
OF AUDITOR'S REPORTS PRESCRIBED UNDER VARIOUS LAWS AND/ OR REGULATIONS


1. The Council of ICAI, at its 326th meeting held from 27th to 29th July
2013 considered the issue relating to
application of Standard on Auditing (SA) 700¸ Forming An Opinion And
Reporting on Financial Statements to such
cases where the format of the auditor's report is prescribed under the
relevant law or the regulation thereunder
and are per se not in line with the requirements of SA 700. The Council
noted that in many cases such prescribed
auditor's report were required to be filed online in a preset form and,
hence, it was not possible for the auditors to
make necessary changes in these reports to bring them in line with the SA
700. Similarly, many a times, even
where the auditor's report were to be submitted in a physical form and not
filed online, the concerned regulatory/
government agencies may not accept such audit reports which contained any
changes made by the auditors to the
prescribed formats to bring them in line with SA 700.
2. In view of the above, the Council decided that while the matter was
being taken up by the Institute with
the relevant regulatory authorities/ Government agencies, etc., to change
the prescribed formats for bringing the
same in line with the requirements of SA 700, the members may, in the
situations described in paragraph 1 above,
submit the auditor's report in the format/s prescribed under the relevant
law or regulation until announcement of
necessary change is made by the appropriate authority. In such cases the
members would not be viewed as having
not complied with the provisions of SA 700.
3. In this context, it may also be noted that paragraph A55 of the SA 200,
Overall Objectives of the
Independent Auditor and the Conduct of An Audit in Accordance With
Standards on Auditing clearly states as
follows:
"A55. In performing an audit, the auditor may be required to comply with
legal or regulatory
requirements in addition to the SAs. The SAs do not override laws and
regulations that govern an audit of
financial statements…………………."
4. Further, paragraph 43 of SA 700 requires that if the auditor is required
by any law or regulation to use a
specific layout or wording of the auditor's report, the auditor shall refer
to Standards on Auditing only if the
auditor's report includes, at minimum, each of the elements as prescribed
in the said paragraph.
5. On a perusal of a cross section of the formats of the auditor's report
prescribed under various laws,
specially, the Income-tax Act, 1961 and the Value Added Tax Acts of various
States, it is clear that these prescribed
formats do not contain all the elements of the auditor's report as required
in paragraph 43 of SA 700. In the
background of the difficulties mentioned in paragraph 1 above, it may also
not be possible for the auditors to
suitably modify the prescribed format. Accordingly, it would not per se be
possible for the auditors to state in their
audit reports that the audit has been carried out in accordance with the
Standards on Auditing. However, the
auditors would be required to carry out the audits in accordance with the
Standards on Auditing issued by the
Institute of Chartered Accountants of India.


http://220.227.161.86/30640aasb-sa700.pdf