Non-Compliances related to Auditor's Report

1. Going Concern

It was observed that the separate section on going concern was not reported by the auditor as required by SA 570 (Revised)

Although there were certain events as evident from the note on Going Concern given in financial statements of the company, which could cast material uncertainty about going concern.

2. SA 700 Forming an Opinion and Reporting on Financial Statements

It was noted that after the implementation of Ind AS in standalone financial statements, the financial statements included the Balance sheet, Statement of Profit and loss (including the other comprehensive income), statement of cash flow and the statement of change in equity.

However, the phrase "including the other comprehensive income" and "statement of change in equity" were not given by the auditor in his audit report.

Auditor's Report is not in line with the requirements of SA 700 Forming an Opinion and Reporting on Financial Statements read with Annexure I of Implementation Guide on Auditor 's Report under Ind AS for transition phase.

3. Under EOM (Emphasis of Matter) SA 706

It was noted that since sufficient information is not given under Note, the auditor cannot draw Emphasis of matter based on note.

Hence, it was viewed that if the effect is material, then the auditor should have qualified his report instead of giving EOM on the same.

4. EXTERNAL CONFIRMATION

It was noted that with regard to debit balances (including trade receivables), the company had not recognized expected credit losses on financial assets including trade receivables.

Further, it was stated that the balance of trade receivables which was disclosed as good was subject to confirmation from parties.

Trade receivable would have material effect on the assets side of the balance sheet as it constituted more than 50% of total assets size.

Further, with regard to credit balances, it was noted from another note to the financial statements that the amount of trade payables was 85% of total liabilities.

As per the definition of trade payables are expected to be settled in the company's normal operating cycle or due to be settled within twelve months from the reporting date.

However, in the given case, material items of trade receivable and credit balances have been stated to be subject to confirmation of parties which raises doubt on its timely settlement.

Hence, considering the materiality of above stated items, auditor should have given the qualified opinion.

5. SA 705 Modifications to the Opinion

It was viewed that the financial impact of such suspension in operation was not disclosed in the said note.

Accordingly, it was viewed that the auditor cannot draw emphasis of matter as sufficient information was not disclosed in the financial statements.

Therefore, the auditor should have expressed qualified opinion on the same in accordance with requirements of SA 705 instead of giving EOM.

6. DISCLOSURE TO NOTES

The references to the financial statements and the related information should be drawn appropriately so as to enable the reader of the financial statements understand the contents in an appropriate manner.