In order to facilitate understanding of the scope and authority of the pronouncements of the Auditing and Assurance Standards Board (‘AASB’), the ICAI has issued revised preface viz., Preface to Standards on Quality Control for Auditing, Review, Other Assurance and Related Services, which has come into effect from 1st April, 2008. Standards of the following nature issued by the AASB shall be collectively known as ‘the Engagement Standards’:

Standards on Quality Control (SQC) are applicable to the auditing firms which performs Audits and Reviews of Historical Financial information and other Assurance and related services engagements.

Standards on Auditing (SAs), to be applied in the audit of historical financial information.

Standards on Review Engagements (SREs), to be applied in the review of historical financial information.

Standards on Assurance Engagements (SAEs), to be applied in assurance engagements, dealing with subject matters other than historical financial information.

Standards on Related Services (SRSs), to be applied to engagements involving application of agreed upon procedures to information, compilation engagements, and other related services engagements, as may be specified by the ICAI.

Auditing and Assurance Standard (‘AAS’) have been re-numbered and classified in the above five categories as Standards on Auditing:

AUDITS AND REVIEWS OF HISTORICAL FINANCIAL INFORMATION

STANDARD ON QUALITY CONTROL (SQC) 1

QUALITY CONTROL FOR FIRMS THAT PERFORM AUDITS AND REVIEWS OF HISTORICAL FINANCIAL INFORMATION, AND OTHER ASSURANCE AND RELATED SERVICES ENGAGEMENTS (Effective for all engagements relating to accounting periods beginning on or after April 1, 2009)

Introduction

The firm should establish a system of quality control designed to provide it with reasonable assurance that the firm and its personnel comply with professional standards, regulatory, legal requirements, and that reports issued by the firm or engagement partner(s) are appropriate in the circumstances.

Elements of a System of Quality Control

The firm’s system of quality control should include policies and procedures on the following elements:

• Leadership responsibilities for quality within the firm.

• Ethical requirements.

• Acceptance and continuance of client relationships and specific engagements.

• Human resources.

• Engagement performance.

• Monitoring.

Policies and procedures should be documented and communicated.

Leadership Responsibilities for Quality: Within the firm policies and procedures should be designed to promote an internal culture that quality is essential in performing engagements. It should require that if appropriate, the firm’s highest authority to assume ultimate responsibility for the system of quality control.

Any person or persons assigned responsibility for quality control system should have sufficient and appropriate experience, ability, and the necessary authority.

Ethical Requirements

Policies and procedures to provide with reasonable assurance that all concerned comply with relevant ethical requirements.

Policies and procedures should emphasise the fundamental principles, e.g

the leadership of the firm,

education and training,

monitoring, and

a process for dealing with non-compliance

Independence

Establish policies and procedures to provide with reasonable assurance that all concerned, maintain independence where required by the Code. It should enable the firm to:

1. Communicate its independence requirements and

2. Identify and evaluate circumstances and relationships that create threats to independence, and to take appropriate action to eliminate or reduce those threats to an acceptable level by applying safeguards, or, if considered appropriate, to withdraw from the engagement.

Such policies and procedures should require:

a. Personnel to provide the firm with relevant information about client engagements, the scope of services, to evaluate the overall impact on independence requirements;

b. Personnel to promptly notify circumstances and relationships that create a threat to independence for taking appropriate action and

c. Accumulate and communicate relevant information to appropriate personnel so that:

1. all can readily determine about satisfaction of independence requirements;

2. maintain and update records relating to independence; and

3. take appropriate action regarding identified threats to independence.

Provide reasonable assurance that it is notified about breaches of independence requirements, and to enable it to take appropriate actions to resolve such situations, which include:

• All to promptly notify on becoming aware about the breaches of independence;

• All to promptly communicate identified breaches of these policies and procedures to:

– the one who needs to address the breach; and

– those who need to take appropriate action; and
 

• Promptly communicate to all about the actions taken to resolve the matter.

• Annually, the firm should obtain written confirmation of compliance with its policies and procedures on independence from all firm personnel

• Setting out criteria for determining the safeguards to reduce the familiarity threat to an acceptable level over a long period of time; and

• For all audits of financial statements of listed entities, requiring the rotation of the engagement partner after a specified period in compliance with the Code. Partner should be rotated after a pre-defined period, normally not more than seven years.

Acceptance and Continuance of Client Relationships and Specific Engagements

Policies and procedures for the acceptance and continuance of client relationships and specific engagements, designed to provide it with reasonable assurance to undertake or continue relationships and engagements only where it:

• Has considered the integrity of the client

• Is competent, capable and has time and resources to do so; and

• Can comply with the ethical requirements and it should document how the issues regarding ethical requirements were resolved.

Policies and procedures on the continuance of the engagement and the client relationship should include consideration of:

1. The professional and legal responsibilities that apply to the declining engagement circumstances, including whether there is a requirement to report to the person who made the appointment or, to regulatory authorities;
   and

2. The possibility of withdrawing from the engagement or from both the engagement and the client relationship.

Human Resources

Policies and procedures designed to provide it with reasonable assurance that it has sufficient personnel with the capabilities, competence, and commitment to ethical principles necessary to perform its engagements in accordance with professional standards and regulatory and legal requirements, and to enable all to issue reports that are appropriate in the circumstances.

Assignment of Engagement Teams

The firm should assign responsibility for each engagement to an engagement partner. with policies and procedures requiring that:

• The identity and role of the engagement partner are communicated to key members of the client’s management and those charged with governance;

• The engagement partner has the appropriate capabilities, competence, authority and time to perform the role; and

• The responsibilities of the engagement partner are clearly defined and communicated to that partner.

The firm should assign appropriate staff with capabilities, competence and time to perform engagements with professional standards and regulatory and legal requirements.

Engagement Performance

Policies and procedures designed to provide with reasonable assurance that engagements are performed in accordance with professional standards and regulatory and legal requirements,

Consultation

Policies and procedures designed to provide with reasonable assurance that:

• Appropriate consultation takes place on difficult or contentious matters;

• Sufficient resources are available to enable appropriate consultation;

• The nature and scope of consultations are documented; and

• Conclusions from consultations are documented and implemented.

Differences of Opinion

Policies and procedures for dealing with and resolving differences of opinion within the engagement team, with those consulted. Conclusions should be documented and implemented.

Engagement Quality Control Review

• Require an engagement quality control review for all audits of financial statements of listed entities;

• Set out criteria against which all other audits and reviews of historical financial information, and other assurance and related services engagements should be evaluated to determine whether an engagement quality control review should be performed; and

• Require an engagement quality control review for all engagements meeting the criteria established in compliance with sub-paragraph.

Policies and procedures setting out

• The nature, timing and extent of an engagement quality control review;

• Criteria for the eligibility of engagement quality control reviewers; and

• Documentation requirements for an engagement quality control review.

Nature, Timing and Extent of the Engagement Quality Control Review Criteria for the Eligibility of Engagement Quality Control Reviewers

Policies and procedures should address the appointment of engagement quality control reviewers and establish their eligibility through:

• The technical qualifications, experience and authority; and

• The degree to which an quality control reviewer can be consulted on the engagement without compromising the reviewer’s objectivity.

Documentation of the Engagement Quality Control Review

Policies and procedures on documentation of the engagement quality control review should require that:

• The procedures quality control reviewer have been performed;

• The quality control review completed before the report is issued; and

• The reviewer is not aware of any unresolved matters about inappropriate conclusions.

Engagement Documentation

Completion of the Assembly of Final Engagement Files.

Policies and procedures for engagement teams to complete the assembly of final engagement files on a timely basis after the engagement reports have been finalised.

Confidentiality, Safe Custody, Integrity, accessibility and Retrievability of Engagement Documentation

Policies and procedures designed to maintain the confidentiality, safe custody, integrity, accessibility and retrievability of engagement documentation.

Retention of Engagement Documentation

Policies and procedures should be in place for the retention of engagement documentation for a period sufficient to meet the needs of the firm or as required by law or regulation, which should be not be shorter than 7 years from the date of report.

Ownership of Engagement Documentation

Monitoring

Policies and procedures relating to the system of quality control are relevant, adequate, operating effectively and complied with in practice. Such policies and procedures should include an ongoing consideration and evaluation of the firm’s system of quality control, including a periodic inspection of a selection of completed engagements.

Evaluate the effect of deficiencies noted as a result of the monitoring process and should determine

• Instances that do not necessarily indicate that system of quality control is insufficient to provide it with reasonable assurance that it complies with professional standards and regulatory and legal requirements, and are appropriate in the circumstances; or

• Systemic, repetitive or other significant deficiencies that require prompt corrective action.

The firm should communicate to relevant engagement partners and other appropriate personnel deficiencies noted as a result of the monitoring process and recommendations for appropriate remedial action.

The firm’s evaluation of each type of deficiency should result in recommendations for one or more of the following:

• Taking appropriate remedial action in relation to an individual engagement or personnel;

• The communication of the findings to those responsible for training and professional development;

• Changes to the quality control policies and procedures; and

• Disciplinary action against those who fail to comply with the policies and procedures of the firm, especially those who do so repeatedly.

Firm should determine what further action is appropriate to comply with relevant professional standards and regulatory and legal requirements including obtaining legal advice.

Annually, the firm should communicate the results of the monitoring of its quality control system to appropriate individuals within the firm, including the firm’s chief executive officer or, if appropriate, its managing partner(s) to enable them to take prompt and appropriate action necessary in accordance with their defined roles and responsibilities. Information communicated should include the following:

• A description of the monitoring procedures performed.

• The conclusions drawn from the monitoring procedures.

• Where relevant, a description of systemic, repetitive or other significant deficiencies and of the actions taken to resolve or amend those deficiencies.

Complaints and Allegations

Policies and procedures to provide it with reasonable assurance:

• Complaints and allegations that the work performed by the firm fails to comply with professional standards and regulatory and legal requirements; and

• Allegations of non-compliance with the firm’s system of quality control.

SA – 230: Audit Documentation

Scope: This standard deals with auditors responsibilities in preparation of audit documentation while auditing financial statements. Specific documentation requirements of other Standards on auditing do not limit its scope.

Nature and Purpose: Audit Documentation provides evidence as to whether the overall objective of the auditor was achieved as well as whether it was planned and performed in accordance with Standards of Auditing as also applicable legal and regulatory requirements.

It assists in planning, performing, fixation of accountability and responsibility, supervision and review of audits. Retaining the records for future audits, as also conduct of quality controls (SQC 1).

Definitions: Audit Documentation: The record of audit procedures performed, relevant audit evidence obtained and conclusions the auditor reached (working papers, work papers)

Audit File: One or more folders or other storage media in physical or electronic form, containing the records that comprise of the audit documentation for a specific engagement.

Experienced Auditor: An individual (whether internal or external to the firm ) who has practical audit experience and a reasonable understanding of audit processes, SA’s and applicable legal and regulatory requirements, the business environment in which the entity operates and auditing and financial reporting issues relevant to the entity’s industry.

Form, Content and Extent in Addition to the Nature and Purpose

An auditor should prepare audit documentation sufficient to enable an experienced auditor having no previous connection with the audit to understand.

a. Nature, timing and extent of audit procedures:

• Identifying characteristics of specific items and matters tested.

• Who performed the audit and the date of completion.

• Who reviewed the report, the date and extent of review.

b. Results of the audit procedures performed and evidence obtained:

• Document discussions of significant matters.

• Nature of the significant matters – when and with whom discussed.

c. Significant matters arising during the audit:

• Document how the inconsistencies have been addressed.

• In case of departure from the standard, the relevant requirements and the reason for departure, the alternative audit procedures performed to achieve the aim of that requirement.

Matters arising after the date of the Auditors Report

If, in the exceptional circumstances, auditor performs new or additional audit procedures or draws new conclusions after the date of the auditor’s report, the auditor shall document:

• Circumstances encountered.

• Newer additional procedures performed, evidence obtained, conclusions reached and it’s effect on auditor’s report.

• When and by whom the resulting changes to audit documentation were made and reviewed.

Additional points

• Assembling of the final Audit file should be completed on a timely basis after the date of the auditor’s report.

• After assembling the same, the auditor shall not delete or discard documentation of any nature before the end of its retention period.

• In case the auditor finds it necessary to modify existing or add new documentation post assembly, he should specify the reasons for them and when and by whom it was made and reviewed.

Application and Other Explanatory Material

• Timely preparation enhances quality, review, evaluation of the audit evidence and conclusions reached before finalisation of the auditor’s report. Documentation prepared after audit work is less accurate than that prepared during audit.

• Form, content and extent depends on size and complexity of the entity, nature of procedures performed, risks, exceptions, audit methodology, tools used and professional judgment.

• Audit Documentation may be recorded on paper or on electronic or other media. Examples: Audit programmes, checklists, analysis, correspondence.

• Audit Documentation should not include superseded drafts of working papers and financial statements, notes reflecting incomplete and preliminary thinking.

• Oral explanations can clarify or explain information contained in audit documentation.

• It is not necessary nor practicable for the auditor to document every matter considered or professional judgment made.

• Judging the significance of a matter requires an objective analysis of the facts and circumstances.

• Summary describing significant matters identified during the audit and how they were addressed, or that includes cross-references to other relevant supporting audit documentation that provides such information.

• The identifying characteristics should be recorded which helps serve a number of purposes.

• Documentation also includes records prepared by the entity’s personnel.

• Retention period of audit engagements is no shorter than seven years from the date of the auditor’s report.

• Unless otherwise stated audit documentation is the property of the auditor. He may make disclosures but these should not affect his independence nor invalidate his work.

(SA) 250 – Consideration of Laws and Regulations in an Audit of Financial Statements

Scope:- This Standard on Auditing (SA) deals with the auditor’s responsibility to consider laws and regulations while performing an audit of financial statements and not compliance with specific laws or regulations.

Effect of Laws & Regulations: The effect on financial statements depends on the fact that whether they are directly or indirectly related to the operational business. Non-compliance of the same shall attract fines, litigations or other consequences.

Responsibility of Management

The management must ensure that entity’s operations are conducted in accordance and with compliance of the various provisions of laws and regulations that determine the reported amounts and disclosures. The management should:

• Monitor legal requirements

• Institute and operate appropriate systems of internal controls

• Develop, publish and follow a code of conduct

• Ensure employees are properly trained

• Monitor compliance with code of conduct

• Engage legal advisors

• In larger companies the policies and procedures are assigned to:

• An Internal Audit function

• An Audit Committee

• Compliance function.

Responsibility of the Auditor:

This SA is designed to assist the auditor in identifying material misstatement of the financial statements. He is responsible for obtaining a reasonable assurance that the financial statements as a whole are free from any material misstatement. However, due to inherent limitations of audit there exists an unavoidable risk.

Effective date: Audit of Financial Statements for period beginning on or after 1st April, 2009.

Objectives: The objectives of an auditor are:

• To obtain sufficient audit evidence regarding compliance with provisions of laws and regulations,

• To perform audit procedures to help identify areas to non-compliance,

• To respond appropriately to non-compliance or suspected compliance,

• To maintain an attitude of professional skepticism.

Definition of Non-Compliance:

Acts of omission or commission by the entity either intentional or unintentional which are contrary in nature other than personal misconduct.

Duties of Auditor:

• Obtain knowledge about legal and regulatory framework

• Know how the entity is complying with the same

• Obtain Audit evidence w.r.t. compliance

• Conduct audit procedures to identity non-compliance

• Ensure compliance by management

• Inspect correspondence, if any, with authorities

• Remain alert to suspection, if any

• Obtain written representations from management where necessary.

Audit Procedures when Non-Compliance is Identified or Suspected

Firstly understand the nature of act and circumstances and then evaluate the possible effects. Then if there is any suspicion , discuss the same with those charged with governance and if sufficient information is not obtained then the auditor can seek legal advice.

SA 260 Communication with those charged with Governance

The auditor shall communicate with those charged with governance and if there exist any audit committee or supervisory board, the auditor shall communicate the matter to them.

Reporting Non-Compliance in the Auditor’s Report on Financial Statements

• The auditor shall express a qualified or adverse opinion on the financial statements in case of non-compliance.

• If he is precluded from obtaining sufficient appropriate audit evidence, the auditor shall express a qualified opinion or disclaim an opinion.

• If he is unable to determine as to how exactly
  non-compliance has occurred, he shall evaluate the effect on auditor’s opinion in accordance with proposed SA 705.

Reporting Non-Compliance to Regulatory And Enforcement Authorities

The auditor has to determine whether he has the responsibility to report the identified or suspected non-compliance to parties outside the entity.

Documentation

• Copies of records or documents relating to identified or suspected non-compliance.

Minutes of discussions with management and those charged with governance or parties outside the entity.

SA-700

Forming an Opinion and Reporting on Financial Statements (Earlier known as ‘The Auditor’s Report on Financial Statements’)

Scope

This SA deals with the auditor’s responsibility to form an opinion on the financial statements and with the form and content of the auditor’s report issued as a result of an audit of financial statements.

It also promotes consistency in the auditor’s report.

Effective date

For audits of financial statements for periods beginning on or after 1-4-2012

Objectives

• To form an opinion on the Financial Statements (FS) based on an evaluation of conclusion drawn from the audit evidence obtained.

• To give a clear written report that describes the basis for the opinion.

Requirements

• Prepared in all material respects and in accordance with the applicable financial reporting framework.

• To conclude that the Financial Statements are free from material misstatement, whether due to fraud or error after taking into account:

a. Obtaining sufficient appropriate audit evidence (SA 330)

b. Uncorrected misstatement are not material, individually or in aggregate (SA 450) and

c. Evaluation as to FS are prepared, in all material respects, in accordance with the requirements of the applicable financial reporting framework which is based on:

• Consideration of the qualitative aspects of the entity’s accounting practices, including indicators of possible bias in management’s judgment.

• Significant accounting policies are disclosed.

• Accounting policies are appropriate and consistent with applicable financial reporting framework.

• Estimates made are reasonable.

• Information is relevant, reliable, comparable and understandable.

• Consider overall presentation, structure, contents and whether related notes represent the underlying transactions and events to achieve fair presentation.

d. Financial statements adequately refer to or describe the applicable financial reporting framework.

Form of Opinion

• Unmodified Opinion : An unqualified opinion should be expressed when the auditor concludes that the financial statements give a true and fair view in accordance with the financial reporting framework used for preparation and presentation of the financial statements.

• Modified Opinion : In the following situations auditor’s report may have to be modified :

a. In respect of the matters that do not affect the auditor’s opinion, the auditor should modify
the report by adding a paragraph to highlight a matter.

For example Corporate Debt Restructuring pending with banks affecting "going concern" or a legal dispute which involves significant uncertainty affecting the financial statements and the same has already been incorporated by management in financial statement. In such matters, the opinion paragraph would refer to the fact that the auditor’s opinion is not qualified in this respect.

b. In respect of the matters that do affect the auditor’s opinion:

A ‘qualified opinion’ should be expressed when the auditor concludes that an unqualified opinion cannot be expressed but that the effect of any disagreement with the management is not so material and pervasive as to require an adverse opinion, or limitation on scope is not material and pervasive as to require a disclaimer of opinion.

A ‘disclaimer of opinion’ should be expressed when the possible effect of a limitation on scope is so material and pervasive that the auditor is unable to obtain sufficient appropriate audit evidence and is hence, unable to express an opinion on the financial statements.

An ‘adverse opinion’ should be expressed when the effect of a disagreement is so material and pervasive to the financial statements that the auditor concludes that a qualification of the report is inadequate to disclose the misleading or incomplete nature of the financial statements

• Opinion other than an unqualified opinion: Whenever the auditor requires an opinion other than unqualified, a description of all the substantive reasons should be included in the report and quantification of the possible effect(s), individually and in aggregate, on the financial statements should be mentioned in the report.

• Limitation on Scope: The SA also requires that in case there is a limitation on scope that requires expression of a qualified opinion or a disclaimer of opinion, the auditor’s report should describe the limitation and indicate the possible adjustments that might have been necessary had the limitations not existed.

Auditor’s Report

For Audits conducted in accordance with SA’s Auditor’s Report :

• Shall be in writing.

• Shall be addressed to the appropriate authorities.

• Shall include a section with the heading "Management’s responsibility for the financial statements" which shall state that it is the responsibility of the management for the preparation of the financial statements.

• Shall include a section with the heading "Auditors responsibility".

• Shall be dated signifying completion of audit.

• Shall mention the place of signing

• Shall be signed in the name of the firm with Firm Registration Number of ICAI, for audit report signed on or after 1st April 2010 and the personal name of the person with Membership number of ICAI, as applicable.

• Shall also incorporate the matters specified by a statute or regulator and /or form prescribed by them e.g. banking and insurance act or forms prescribed by RBI.

Illustrative Specimen Audit Report

INDEPENDENT AUDITOR’S REPORT

To

The Members of PQR Company Limited
Report on the Financial Statements

We have audited the accompanying financial statements of PQR Company Limited (“the Company”), which comprise the Balance Sheet as at March 31, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 (“the Act”). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 20XX;

(b) in the case of the Statement of Profit and Loss, of the profit/ loss for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report) Order, 2003 (“the Order”) issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Act, we report that:

1. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

2. In our 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 and proper returns adequate for the purposes of our audit have been received from branches not visited by us;

3. 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 and with the returns received from branches not visited by us;

4. In our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

5. On the basis of written representations received from the directors as on March 31, 20XX, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 20XX, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

6. Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

For BCA and Co.
Chartered Accountants
Firm’s Registration ________
Signature
(Name of the Member Signing the Audit Report)
(Designation)
Membership No
Place of Signature

Specimen of Disclaimer to be placed before Paragraph on opinion

Basis for Disclaimer of Opinion

We were appointed as auditors of the Company after March 31, 2013 and thus could not observe the counting of physical inventories at the beginning and end of the year. Accordingly, we were unable to satisfy ourselves by alternative means concerning the inventory quantities held at December 31, 2012 and March 31, 2013 which are stated in the Balance Sheet at ` 111 and ` 222, respectively. In addition, the introduction of a new computerised accounts receivable system in September 2013 resulted in numerous errors in accounts receivable. As of the date of our audit report, management was still in the process of rectifying the system deficiencies and correcting the errors. We were unable to confirm or verify by alternative means accounts receivable included in the Balance Sheet at a total amount of ` qqq as at March 31, 2013. As a result of these matters, we were unable to determine whether any adjustments might have been found necessary in respect of recorded or unrecorded inventories and accounts receivable, and the elements making up the Statement of Profit and Loss and Cash Flow Statement.

Specimen of Disclaimer of Opinion

Because of the significance of the matters described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial statements.

Specimen of Emphasis of Matter

Emphasis of Matter

We draw attention to Note X to the financial statements, which describes the uncertainty related to the outcome of the lawsuit filed against the Company by XYZ Company.

Our opinion is not qualified in respect of this matter.

Specimen of Other matter paragraph to be placed after the opinion but before signature

Other Matter

We did not audit the financial statements of certain subsidiaries, whose financial statements reflect total assets (net) of ` XXXX as at March 31, 2012, total revenues of Rs. XXXX and net cash outflows amounting to `. XXXX for the year then ended. These financial statements have been audited by other auditors whose reports have been furnished to us by the Management, and our opinion is based solely on the reports of the other auditors.

Our opinion is not qualified in respect of this matter.

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