Ms Word Format Audit Engagement Letter Cos Act 2013
Ms Word Format Audit Engagement Letter Cos Act 2013
Ms Word Format Audit Engagement Letter Cos Act 2013
in
Illus. 1
Example of an Audit Engagement
Letter
Audit of Financial Statements under the Companies Act 2013 and the Rules Thereunder
(When Reporting u/s 143(3)(i) is Applicable)
1
(to be added to Appendix 1 to SA 210 )
Dear Sirs,
My / Our audit will be conducted with the objective of me / our expressing an opinion if the aforesaid
financial statements give the information required by the 2013 Act in the manner so required, and
give a true and fair view in conformity with the applicable accounting principles generally accepted in
India, of the state of affairs of the Company as at 31st March, 20YY, and its profit/loss and its cash
flows for the year ended on that date which, inter alia, includes reporting in conjunction whether the
Company has an adequate internal financial controls system over financial reporting in place and
the operating effectiveness of such controls. In forming my / our opinion on the financial statements, I
/ we will rely on the work of branch auditors appointed by the Company and my / our report would
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expressly state the fact of such reliance.
I / We will conduct my / our audit in accordance with the Standards on Auditing (SAs), issued by the
Institute of Chartered Accountants of India (ICAI) and deemed to be prescribed by the Central
Government in accordance with Section 143(10) of the 2013 Act. Those Standards require that I / we
comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material misstatements. An audit involves
performing procedures to obtain audit evidence about the amounts and the disclosures in the financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of
the risks of
for any subsequent changes. This may be required because the appointment would need to be ratified at each
AGM u/s 139 of the 2013 Act.
3 Delete sentence on branch auditors where not
applicable.
material misstatement of the financial statements, whether due to fraud or error. In making those
risk assessments, the auditor considers internal financial control relevant to the Company’s
preparation of the financial statements that give a true and fair view in order to design audit
procedures that are appropriate in the circumstances.
The terms of reference for my / our audit of internal financial controls over financial reporting
carried out in conjunction with our audit of the Company’s financial statements will be as stated in the
separate engagement letter for conducting such audit and should be read in conjunction with this letter.
An audit also includes evaluating the appropriateness of the accounting policies used and the
reasonableness of accounting estimates made by the Management, as well as evaluating the
overall presentation of the financial statements.
Because of the inherent limitations of an audit, including the possibility of collusion or improper
management override of controls, there is an unavoidable risk that material misstatements due to
fraud or error may occur and not be detected, even though the audit is properly planned and
performed in accordance with the SAs. Also, projections of any evaluation of the internal financial
controls over financial reporting to future periods are subject to the risk that the internal
financial control over financial reporting may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
My / Our audit will be conducted on the basis that the Management and those charged with
governance (Audit Committee / Board) acknowledge and understand that they have the responsibility:
(a) For the preparation of financial statements that give a true and fair view in
accordance with the applicable Financial Reporting Standards and other generally accepted
accounting principles in India. This includes:
The responsibility for the preparation of the financial statements on a going concern basis;
The preparation of the annual accounts in accordance with, the applicable accounting
standards and providing proper explanation relating to any material departures from those
accounting standards;
Taking proper and sufficient care for the maintenance of adequate accounting records in
accordance with the provisions of the 2013 Act for safeguarding the assets of the Company and
for preventing and detecting fraud and other irregularities;
Laying down internal financial controls to be followed by the Company and that such
internal financial controls are adequate and were operating effectively; and
Devising proper systems to ensure compliance with the provisions of all applicable
laws and that such systems were adequate and operating effectively.
(b) Identifying and informing me / us of financial transactions or matters that may have
any adverse effect on the functioning of the Company.
All the pending litigations and confirming that the impact of the pending litigations
on the
Company’s financial position has been disclosed in its financial statements;
All material foreseeable losses, if any, on long term contracts including derivative
contracts and the accrual for such losses as required under any law or accounting standards; and
(d) Informing me / us of facts that may affect the financial statements, of which
Management may become aware during the period from the date of my / our report to the date the
financial statements are issued.
(i) Access, at all times, to all information, including the books, accounts,
vouchers and other records and documentation of the Company, whether kept at the
Head Office or elsewhere, of which the Management is aware that are relevant to the
preparation of the financial statements such as records, documentation and other
matters. This will include books of account maintained in electronic mode;
(ii) Access, at all times, to the records of all the subsidiaries (including associate
companies and joint ventures as per Explanation to Section 129(3) of the 2013 Act) of
the Company in so far as it relates to the consolidation of its financial statements,
as envisaged in the 2013 Act;
(iii) Access to reports, if any, relating to internal reporting on frauds (e.g., vigil
mechanism reports etc.), including those submitted by cost accountant or company
secretary in practice to the extent it relates to their reporting on frauds in
accordance with the requirements of Section 143(12) of the 2013 Act;
(iv) Additional information that I / we may request from the Management for the
purposes of my / our audit;
(v) Unrestricted access to persons within the Company from whom I / we deem it
necessary to obtain audit evidence. This includes my / our entitlement to require from
the officers of the Company such information and explanations as I / we may think
necessary for the performance of my / our duties as the auditors of the Company; and
(vi) All the required support to discharge my / our duties as the statutory auditors as
stipulated under the Companies Act, 2013/ ICAI standards on auditing and
applicable guidance.
As part of my / our audit process, I / we will request from the Management written
confirmation concerning representations made to me / us in connection with my / our audit.
My / Our report prepared in accordance with relevant provisions of the 2013 Act would be addressed
to the shareholders of the Company for adoption of the accounts at the Annual General Meeting.
In respect of other services, my / our report would be addressed to the Board of Directors. The form
and content of my / our report may need to be amended in the light of my / our audit findings.
In accordance with the requirements of Section 143(12) of the 2013 Act, if in the course of
performance of my / our duties as auditor, I / we have reason to believe that an offence involving fraud
is being or has been committed against the Company by officers or employees of the Company, I / we
will be required to report to the Central Government, in accordance with the rules prescribed in
this regard which, inter alia, requires me / us to forward my / our report to the Board or Audit
Committee, as the case may be, seeking their reply or observations, to enable me / us to forward the
same to the Central Government.
As stated above, given that I am / we are required as per Section 143(12) of the Act to report on
frauds, such reporting will be made in good faith and, therefore, cannot be considered as breach of
maintenance of client confidentiality requirements or be subject to any suit, prosecution or other legal
proceeding since it is done in pursuance of the 2013 Act or of any rules or orders made thereunder.
I / We also wish to invite your attention to the fact that our audit process is subject to 'peer review' /
‘quality review’ under the Chartered Accountants Act, 1949. The reviewer(s) may inspect, examine or
take abstract of my / our working papers during the course of the peer review/quality review.
I / We may involve specialists and staff from our affiliated network firms to perform certain specific
audit procedures during the course of my / our audit.
In terms of Standard on Auditing 720 – “The Auditor’s Responsibility in Relation to Other Information
in Documents Containing Audited Financial Statements” issued by the ICAI and deemed to be
prescribed by the Central Government in accordance with Section 143(10) of the 2013 Act , I / we
request you to provide to me / us a Draft of the Annual Report containing the audited
financial statements so as to enable me / us to read the same and communicate material
inconsistencies, if any, with the audited financial statements, before issuing the auditor’s report on the
financial statements.
{Other relevant
information}
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{Insert Other information, such as fee arrangements, billings and other specific terms, as
appropriate.}
This letter should be read in conjunction with my / our letter dated _ for the Audit of Internal
Financial Controls Over Financial Reporting under the 2013 Act, in respect of which separate fees
have been fixed/will be mutually agreed.
Please sign and return the attached copy of this letter to indicate your acknowledgement of,
and agreement with, the arrangements for my / our audit of the financial statements including our
respective responsibilities.
Yours
faithfully,
(signature
)
(Name of the
Member)
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(Designation)
(Name of the
Firm)
Date:
Place:
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