Auditor Objectivity:

The objectives of the present paper is

To analyse Auditors Objectivity & scepticismTo study & analyse the role of an AuditorTo examine the liabilities of an Auditor

The Role of an Auditor:

The auditor plays vital role in any business organisation. He has to certify the Management and Board of Directors of the Company under Section 134(5) of the Companies Act, 2013 that they prepared financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company are in accordance with the accounting principles generally accepted in India and also followed the Accounting Standards as set out under Section 133 read with rule 7 of Companies (Accounts) Rules, 2014. Under the Act, the auditor further report that:

a. they have sought and obtained all the information and explanations which were necessary for the purpose of their audit;b. in their opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;c. the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account;d. in their opinion, the financial statements comply with the applicable Accounting Standards as set out under the Act.e. on the basis of written representations received from the directors as on March 31, the year and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, of the year, from being appointed as a director in terms of Section 164(2) of the Act.f. In their opinion and to the best of their information and according to the explanations given to them, they report as under with respect to other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014 (1) The Company does not have any pending litigations which would otherwise impact the financial position of the company. (2) The Company did not have any long-term contracts including derivative contracts which would leads to losses. (3) Any unpaid dividend amount transferred to investor education and protection fund as per the statute.

Compliances:

The compliance required to be followed as:

Financial Statements are Balance Sheet, Profit and Loss and Cash Flow Statement. The cash flow statement is not required in case of an OPC i.e., One Person Company, Small Company and Dormant Company.uniform financial year, i.e., 1 April to 31 March, with limited exemptionsThe Companies need to prepare and maintain financial statements in an electronic format. In addition, XBRL reporting has been made mandatory for some specified companies.CFS is to be prepared and laid before an AGM, in addition to SFS. Audited accounts of the listed companies, along with those of the subsidiaries, have to be made available on the websiteAudited accounts of all of the subsidiaries are required to be prepared and provided to shareholders on requestFinancial statements need to be signed at least by the Chairperson of the company, if authorized, by the board or two Directors, including Managing Director (MD), Officer (CFO) and Company Secretary (CS), wherever they are appointed. In case of an OPC’s balance sheet and statement of profit and loss, only one Director is required to sign.

SATYAM COMPUTERS – A Myth:

In the light of recent developments, the auditors are charged with negligence and not paying due care while auditing the documents and certifying the financial statements. In Satyam scam the auditors were held responsible. On 7th January 2009, the chairman of Satyam, Mr B Ramalinga Raju resigned and confessed that he had manipulated the accounts of Rs.14162 crores in several forms. The entire corporate world was shocked. The auditing firms price water house Cooper’s Indian arm was fined $6 million by the US securities and Exchange Commission for failing in uplifting the code of conduct and auditing standards which performing their duties relating to the accounts of Satyam Computers Services. The Securities and Exchange Board of India also barred price water house from auditing any listed company in India for 2 years as they did not comply with auditing standards. The auditor relied on the false information provided by the management of Satyam rendered its audit reports become inaccurate and unreliable. ON 7TH JANUARY 2009, THE CHAIRMAN OF SATYAM, MR. B RAMALINGA RAJU RESIGNED AND CONFESSED THAT HE HAD MANIPULATED THE ACCOUNTS OF RS.14162 CRORES IN SEVERAL FORMS. THE ENTIRE CORPORATE WORLD WAS SHOCKED The company inflated its revenues, falsifying accounts and income tax returns, fabricating invoices are other findings of the scam.

SHELL COMPANIES – A Challenge:

The Indian Government under the head ship of Prime Minister Narendra Modi took a step to battle against black money in the process of check black money more than 1.75 lakh shell companies are deregistered. These are the companies not doing any business activities and not having significant assets on their own. The main motto is to carry out some legitimate and illegitimate things of hiding the data of ownership, money laundering and avoid tax. The Serious Fraud Investigation Office (SFIO), Ministry of Corporate Affairs (MCA), Registrar of Companies (ROC), Income Tax (IT) departments are finding many shell companies which are having same address, same auditors and same directors etc., whereas auditors are failed nailed off. The auditors should be vigilant with any such suspicious data to find and avoid wrong things at the beginning.

The Liability of an Auditor:

A Company auditor is appointed under the Companies Act, 2013, and hence, his position differs from that of one appointed by a private concern. His appointment, remuneration, rights and duties, liabilities and responsibilities, etc. are defined and laid down by the Companies Act. The Auditors liabilities may be kept under the following heads:

Liability for Negligence:

The auditor safeguards the interests of the shareholders as such he performs his duties as an agent of the shareholders. The auditor should pay a reasonable care and diligence in the performance of his duties as lay down by the statute. If the auditor fails to do in his services, the principal i.e., shareholders suffer a loss and the auditor is held responsible to make good the loss under the law of agency. At the same time he is not responsible for the other losses caused to the principal. The same upheld in the case of Liverpool & Wigan Supply Association Ltd., in 1907. The auditor is not liable for loss without negligence and negligence without loss.

Liability for Misfeasance:

The interests of the shareholders vested on the auditor of a company. He is liable for negligence in the performance of his duties if he commits a misfeasance i.e., a breach of trust or duty. It implies a wrong done. An auditor does something wrong in performance of his duties resulting in a financial loss to the company, he is guilty of misfeasance.

Criminal Liability:

The auditor is liable for his acts of omission or commission which can be construed as an offence under the provisions of the companies act. He will be punished with imprisonment, fine or both.

Conclusion:

Errors are inevitable while writing and maintaining numerous transactions and books of accounts. The unintentional errors are called mistakes whereas intentional errors are called fraud. An auditor should be vigilant to differentiate between these two and apply his professional knowledge and skills. The professional scepticism takes him to new heights in his profession otherwise it becomes suicidal to his career.