An auditor is an authorised personnel that reviews and verifies the accuracy of financial records and ensures that companies comply with tax norms. They primarily objective is to protect businesses from fraud, highlight any discrepancies in accounting methods, among other things.
The role of an auditor, in general, is no walk in the park. Having been regarded as a certified professional, the auditor has placed on himself, responsibilities to various parties and the duties that go with it. The auditor’s opinion basically makes or breaks the reliability of the financial statements and the information they provide. Audited financial statements have an extremely high degree of reliability and validity in comparison with unaudited statements.
In simple terms, an auditor is an individual who is appointed to inspect the books of accounts of a company, the validity and accuracy of the transactions contained therein. He also forms an opinion on the overall view of the financial statements, whether the statements depict a true and fair view of the entity’s financial position.
The duties of an auditor have been laid down by the Companies Act, 2013, provided in Section 143. The Act explains the duties in a simplified manner, although the list given is not exhaustive.
Prepare an Audit Report
An audit report, in simple terms, is an appraisal of a business’s financial position. The auditor is responsible for preparing an audit report based on the financial statements of the company. The books of accounts so examined by him should be maintained in accordance with the relevant laws. He must ensure that the financial statements comply with the relevant provisions of the Companies Act 2013, relevant Accounting Standards etc. In addition to this, it is imperative that he ensures that the entity’s financial statements depict a true and fair view of the company’s financial position.
Form a negative opinion, where necessary
The auditor’s report has a high degree of assurance and reliability because it contains the auditor’s opinion on the financial statements. Where the auditor feels that the statements do not depict a true and fair view of the financial position of the business, he is also entitled to form an adverse opinion on the same. Additionally, where he finds that he dissatisfied with the information provided and finds that he cannot express a proper opinion on the statements, he will issue a disclaimer of opinion. A disclaimer of opinion basically indicates that due to the lack of information available, the financial status of the entity cannot be determined. However, it is to be noted that the reasons for such negative opinion is also to be specified in the report.
One of the auditor’s important duties is to make inquiries, as and when he finds it necessary. A few of the inquiries include:-
Lend assistance in case of a branch audit
Where the auditor is the branch auditor and not the auditor of the company, he will lend assistance in the completion of the branch audit. He shall prepare a report based on the accounts of the branch as examined by him and then send it across to the company auditor. The company auditor will then incorporate this report into the main audit report of the company. In addition to this, on request, if he wishes to, he may provide excerpts of his working papers to the company auditor to aid in the audit.
Comply with Auditing Standards
The Auditing Standards are issued by the Central Government in consultation with the National Financial Reporting Authority. These standards aid the auditor in performing his audit duties with relevant ease and accuracy. It is the duty of the auditor to comply with the standards while performing his duties as this increases his efficiency comparatively.
Reporting of fraud
Generally, in the course of performing his duties, the auditor may have certain suspicions with regard to fraud that’s taking place within the company, certain situations where the financial statements and the figures contained therein don’t quite add up. When he finds himself to be in such situations, he will have to report the matter to the Central Government immediately and in the manner prescribed by the Act.
Adhere to the Code of Ethics and Code of Professional Conduct
The auditor, being a professional, must adhere to the Code of Ethics and the Code of Professional Conduct. Part of this involves confidentiality and due care in the performance of his duties. Another important requisite is professional scepticism. In simple words, the auditor must have a questioning mind, must be alert to possible mishaps, errors and frauds in the financial statements.
Assistance in an investigation
In the case where the company is under the scope of an investigation, it is the duty of the auditor to provide assistance to the officers as required for the same. Hence, it can be seen that the duties of the auditor are pretty diverse, it has an all-round and far-reaching impact. The level of assurance provided by a set of audited financial statements is comparatively far higher as compared to regular unaudited financial statements.