True and Fair view of accounts - An opinion by Statutory Auditor

Dilip K Raina 
on 11 September 2019


Desire to know the truth about the financial health of a country, a business house or about an individual family has remained a continuous desire of the international community, investors and neighbours. Lot of investment decisions in the present-day world are based on the reports generated by financial analysists. One of the trusted and important sources of financial information comes from audited published financials.

Historically daily affairs of business houses use to be managed by the investors/entrepreneurs individually. Those days business houses use to be small and easy to manage.  But with the growth in the size of business houses need was felt to employ people to handle different activities of an organisation under the direct control of the owners. With the passage of time business organisations started breaking the local barriers and moved out of districts, states and the countries. Entrepreneurs were not able to control activities directly and started hiring professional business managers to manage day to day affairs of their business houses. Managers started taking decisions on behalf of the owners.

To ensure that things move in the desired direction, owners of business houses started developing processes and procedures to be followed by the employees of the organization to maintain uniformity of actions and clarity about duties, responsibilities and powers of managers at different levels. Independent professionals/subject specialists were hired to verify the records of their business houses and report any deviations from established processes and procedures by the employees.

One of the most important activity was recording, managing, arranging and deploying funds effectively, diligently and efficiently to achieve the desired results. Finance and Accounts being vital functions for the existence of any business organisation thus a need to get accounts audited by an independent agency was felt. Accountants were considered as the subject specialist for this activity and were given the name “auditor”. The culture of hiring independent accounting professionals started taking shape and such accountants were given the name of Chartered (hired) accountants. Chartered Accountants command a great respect in the society as they are considered experts in their field and honest in doing their job by expressing their free and fearless opinion on the accounts they have audited.

A statutory auditor represents and reports to the owners/shareholders of a business house. His job is that of a trustee of shareholders who is required to verify the records necessary for accomplishment of his job as an auditor. Statutory auditors are appointed under the different laws in India. In addition to the owners/shareholders the audited accounts are source of information to the different Government departments, PSUs, domestic as well as international investing agencies, financial analysists and data storehouses to understand the present economic health of a country and predict the future economic scenario of a country, region etc. 

Present day expectations from an auditor are very high. An auditor is supposed to follow the Guideline issued by ICAI, he is expected to verify the compliance required under Companies Act, Income Tax Act, GST, Labour Laws, Provident Fund Act, Bonus Act, Gratuity, Laws relating to FEMA, Import-Export, regulatory body’s requirements etc. During the recent past auditors have been loaded with lots of responsibilities and have been made accountable under civil and criminal laws. Due to the everchanging laws and compliance the present-day auditor is working under constant pressure both form the regulatory frame work as well as from his clients. He finds it difficult to please both, the clients and the regulators.

It is practically impossible to be expert in all the subjects which an auditor is expected to be having mastery/expert knowledge while conducting an audit. We, auditors, need to understand, with the ever-growing demand for precision in audits the only solution is to develop a subject-wise specialization.  We need to create groups or partnerships of chartered accountants with specialization in different subjects and let audit program be drafted in a manner which ensures that at least the financials are submitted for signatures only after various subject specialists have reviewed the audit notes, audit process followed, and information provided therein. Audit teams must be trained in such a way so that audit notes are maintained subject wise for quick and time-saving review. This will minimize errors or misstatements in the signed accounts which an auditor has qualified as true and fair in his report. Auditors are expected to provide clear and un-interpretable explanations of facts which will or may impact the financials of a business house in the notes to accounts with a reference in his audit report. 

It is a well-known fact that professional firms or companies which are being run by a group of professionals grow quickly and sustain for a longer time. They command more respect and trust of stakeholders than others. The execution of their assignment as far as quality, presentation and compliance are always better as they usually have a dedicated team to improve their reporting structure through constant research and improvement.

Note: I have gone through many articles and also share my experience.


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