Mandatory Audit Documentation to be Secured by Statutory Auditors Before Signing the Audit Report
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- Last Updated on 11 September, 2023
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The financial statements of a company were signed by directors, CEO, CFO, and CS, however, the audit file does not contain any evidence of approval of Financial Statements by the Board of Directors. The auditors contend that they had obtained constructive evidence, in the form of receipt of signed copies of the financial statements, before they signed on the same and issued the audit report thereon. Further considering the ‘Doctrine of Indoor Management’, they are entitled to assume that financial statements signed by directors, CEO, CFO, and CS were approved by the Board of Directors before they were so signed.
NFRA held the statutory auditor guilty on account of section 134(1) of the Companies Act, 2013 which states it is a prerequisite that the Board shall approve and authorize the financial statements before an auditor makes a report on such approved & signed financial statements. Statutory auditors have access to records of the Company, they cannot claim shelter under the “Doctrine of Indoor Management”.
Regarding the audit documentation, the auditors should have obtained a certified copy of the Board resolution approving the Financial Statements and authorizing the Directors to sign the Financial Statements and should have kept the same in the Audit File.
To know more mandatory documents to be secured by the Statutory Auditor before signing the Audit report.
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