Learn the changing dimensions of Audit in India

“The basic purpose of audit is to obtain the reasonable assurance about whether the Financial Statements as a whole are free from Material Misstatements, whether due to fraud or error, and to further report the same to the stakeholders or one who had appointed the auditor.” 

However in past few periods, due to the cases of fraud by companies against banks or shareholders came to light, the Regulatory Authorities are in draconian mode against any false move of auditors and other responsible person. This had impacted a lot on auditing firms that they are now very careful against any Audit Risk.

Imaage Souce: Google

According to the data collected by Prime Database, from the start of the current year, i.e. 2018, more than 30 firms have resigned as auditor of companies. This report becomes even shocking when it is compared to last year, i.e. 2017, when only 7 auditors had resigned throughout the year.

Recently the auditors of PwC India had quitted as auditor to BSE-Listed Construction Infrastructure company Atlanta Limited, after it apparently refused to share details of ongoing Income Tax Investigation and resignation of Independent Director. The Income Tax Department is investigating sources of some of the company’s Income and Expenditure and some transactions escaped tax scrutiny. The investigations have been going on for past few years and assessment order was passed by tax departments this year.

Right after this incident, the shares of Atlanta hit 20% lower circuit limit on last Thursday. Atlanta on the other hand, had accepted the resignation of PwC and refuted their charges, by saying that auditors were informed about receipts of orders received by company from Income Tax Department.

This is the another case of big auditor resigning from a company due to insufficient information about financial accounts.  Deloitee Haskins and Sells had quitted as auditor to Manpasand Beverages on Sunday.

This case is similar to PwC’s reason for quitting Atlanta audit, i.e. Failure by company to share key data.

This shows that how much the auditors are motivated by fear of being pulled by regulator. Audit firms are being especially careful with companies in Jewelry, Infrastructure and Real Estate.

Not only the auditors, Independent Directors and CS are also resigning from company, around the time when auditors are quitting.

This change is positive, and leading to the more cautious  and painstaking way of fulfilling responsibility. As auditors and other responsible persons linked with any company will not take risk of company’s errors or fraud. That’s why we should appreciate these changes, as it will help to engage audit diligently.