Shrikrishna
— Arrey Arjun, I am waiting for you for a long time. Why so much delay?
Arjun
— What to tell you, Bhagwan! A most disorganised client who has no
discipline at all was with me.
Shrikrishna
— He must be in financial stress.
Arjun
— Exactly. He wants to apply for some loan and wanted his balance sheet of 31st
March, 2019 instantly!
Shrikrishna
— But are the accounts ready?
Arjun
— That’s the main problem. Somehow, he has got it done. Volume is not much and
it is a private limited company.
Shrikrishna
— Have you signed his balance sheet?
Arjun
— Yes, I was helpless.
Shrikrishna
— Did you obtain signatures of at least two directors?
Arjun
— It was a fire-fighting situation. I have signed in good faith. One of the
directors has signed. The other one will sign it later.
Shrikrishna
— This good faith is very dangerous. There are cases where the other director
refused to sign due to dispute between them. Result – the auditor was held
guilty.
Arjun
— Oh my God! But these are nice people. They won’t ditch me.
Shrikrishna
— Don’t be overconfident. Don’t take things for granted. This is kaliyug
and anything can happen. What about the other directors of the private company?
Arjun
— Actually, there are four directors. But only two are active.
Shrikrishna
— That is an additional risk. What is important is the approval of accounts in
the board meeting. Signing by two or three directors is consequential. The
board approves the accounts and authorises two or three of them to sign the
accounts on behalf of the company. This is extremely important. You must obtain
a confirmation that the board has approved the accounts.
Arjun
— Oh, really? We have never obtained such confirmations.
Shrikrishna
— It has been held to be a misconduct. Another important thing, have you issued
the audit report?
Arjun
— Yes, they wanted it. My assistant just changed the year in last year’s
report. It was a copy-paste as there was virtually no activity.
Shrikrishna
— Are you sure that no change was required?
Arjun
— Overall, I saw facts and figures were practically the same.
Shrikrishna
— My dear Arjun, are you aware that the format of company audit report
has been changed?
Arjun
— No. When was it changed? Is the change applicable to accounts for the year
ended on 31st March, 2019?
Shrikrishna
— It is very much applicable to accounts for the year ended on 31st
March, 2019. The changes are not very significant. Three standards have been
revised and one is newly introduced. Go rush and hold that report before it is
released. Arjun, I never expected you to be so negligent.
Arjun
— What to do? My colleagues are enjoying their vacation. Senior articles are on
exam leave. Exams were postponed due to Lok Sabha elections. I am fighting all
alone.
Shrikrishna
— You must now gear up for the audits for the year ended on 31st
March, 2019. Please try to implement all those things which you have so far
taken very lightly.
Arjun
— Like what?
Shrikrishna
— Writing for independent confirmations of balances of debtors, creditors,
loans, banks and so on. Also you need to carefully maintain the working papers.
Moreover, also ask the companies to update their registers of directors,
shareholders; and also minutes of meetings.
Arjun
— I agree. We have been taking these things lightly. But now we cannot afford
to continue to do so. Audit is becoming more demanding. We need to change.
Thank you for opening my eyes.
Shrikrishna
— Take care.
!!Om Shanti!!
[This dialogue is in the
context of the recent changes in company audit reports; new SAs and general
preparation for ensuring audits. Standard on Auditing 700, 705 and 706 have
been revised and Standard on Auditing 701 is newly introduced.]
