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Audit of accounts and records of any person is required under various business laws in India that are applicable on such person whether natural or artificial. For example, Annual Statutory Audit is required for companies & cooperative societies, Tax Audit is required for any person having business income or turnover over specific threshold limits, Internal, Secretarial, Special & Cost Audits are also applicable on the basis of prescribed threshold limits and conditions under Company Law. Moreover, Operational Audit, Safety Audit, Environmental Audit, Labour Audit, Energy Audit etc are also prescribed under various industrial laws.

Thus a large business entity is required to obtain numerous audit reports n certificates from professionals to be submitted to various govt authorities for getting vendor approvals, tax assessments, sale orders & contracts etc, and in most of the cases, professional has to be independent holding a practice certificate from some statutory authority.

Therefore we are living in a world of audit certificates in case of financial transactions undertaken by us and government agencies trust these certificates blindly since they can use it against the business entity as well as the professionals. Various High Courts and tribunals have ruled that since businessman may be gullible and ignorant of applicable laws, he may be exonerated from prosecution if he has obtained certificate of compliance from a registered professional and has relied thereon. In such cases the professional may be prosecuted under such law as well as relevant professional law.

Now everyone can understand that audit reports and certificates under various business laws have become a tool in hands of businessmen as well as govt authorities in India, besides it has become a cheap practice due to competition among the professionals as well, who have become instrumental in black money generation, scams, tax evasion, misappropriation of public funds etc.

Although audits & certifications under different laws cannot always be consolidated in one law or policy and auditor may not have adequate technical knowledge of all the industries and financial laws and its application to the business entity and an environment of distrust may prevail in the country, I strongly feel that govt should address the issue and constitute the authority under Section 132 of companies act as soon as possible.

Amend Section 132 to include all professional who are entitled to conduct audit and issue certificates.

Make separate audit & reporting formats under specific requirements under various laws.

Business entity concerned and the professional auditor both must be liable for wrong certificate jointly and severally under the relevant law if any.

Professionals must get enrolled under the relevant jurisdictional govt authorities that require audit report or certificate as the case may be in addition to practice certificate. (like advocates are enrolled under state High Court and District Sessions Court both)


Published by

CA Pradeep Garg
(CA & CS)
Category Audit   Report

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