The importance of audit letters

Several oral communications exchanged during the course of the audit are given a finality by putting them in black and white.

The ICAI hasissued a standard on audit communications.

M. V. Kali Prasad

Several letters are exchanged between the auditor, the auditee and other persons in the course of an audit. Considering the importance, the ICAI has issued a standard on audit communications.

It is common knowledge that written evidence is more reliable than oral evidence. Several oral communications exchanged during the course of the audit are given a finality by putting them in black and white before concluding the audit.

Appointment letter

Letter of appointment is issued by the auditee to the auditor. Appointment of the auditor is by way of a resolution passed at the annual general meeting of the company. The Contract Act requires that the offer is to be communicated to the offeree. This letter of appointment is the communication from the auditee to the auditor of his appointment. A copy of the resolution passed appointing him as the auditor is attached to the letter of appointment.

The letter of appointment contains the terms of reference, scope of work, remuneration, timeframe within which the assignment is to be completed and the authority to which the report is to be submitted.

Letter of appointment is required in case of statutory audits also.

The Companies Act has several provisions on the appointment of the auditor and the scope of work. Communication of such appointment is in compliance with the Contract Act. Since the audit of a company is under statute, scope of work is determined by law, the letter of appointment merely mentions of the appointment of the auditor.

The auditor is required to communicate to the MCA whether or not he has accepted the appointment within 30 days of the date of receipt of the communication of his appointment (Form 23B). A scanned copy of the letter of appointment is to be attached to the form to be submitted to the MCA.

But in case of voluntary audit, the terms of appointment, scope of work and limitations of scope, etc., has to be clearly stated in the letter of appointment to avoid confusion or controversy at a later date.

The Contract Act requires the acceptance to be communicated to the proposer. The auditor has to communicate to the auditee whether or not the assignment is accepted. The appointment is completed only when the acceptance is communicated by the auditor.

Letter of engagement

Letter of engagement is issued by the auditor to the auditee. This letter is the acceptance of the assignment and it sets out the scope of work as understood by the auditor. This letter of engagement contains the details of the work entrusted, limitations as to scope of work, etc.

Considering its importance, the ICAI has issued a separate standard on terms of reference. The standard suggests separate letters of engagement be issued for each of the assignment such as statutory audit, tax audit, etc.

The following details are contained in a letter of engagement:

Responsibility of the management such as selection of appropriate accounting policies and their consistent application, preparation and presentation of financial statements;

Scope, objective and limitations to scope of work;

Right of access to books of account;

Basis for computation of fees and reimbursement of expenditure; and

Need for appointment of experts if necessary.

Such a letter of engagement acquires significance, particularly in the case of voluntary audits such as internal audits, audits of non-corporate entities, etc., to avoid confusion and misunderstanding of the work entrusted to the auditor.

Letters seeking confirmations are sent by the auditor to the debtors and creditors, bankers, consignees, outsourcing agencies, etc. Confirmations are classified as positive confirmations and negative confirmations.

The auditor can choose the kind of confirmation he requires from the respondents. Standard on external confirmations issued by the ICAI formulated guidelines to seek such confirmations and the basis of evaluation of such confirmations. The auditor may require the confirmations be sent to him directly.

Letter of weakness is issued by the auditor to the management. Upon a proper evaluation of the internal control systems, the auditor should bring to the notice of the management, any weaknesses observed by him in the internal control systems.

The auditor might as well tumble upon a weakness in the system even during the course of the audit. The auditor should consider the probability of frauds arising out of the weaknesses in the internal control systems.

In view of the likelihood of misstatements, the auditor should use his judgment to decide if any additional, amended, altered extended audit procedures would be essential.

Letters to experts is issued by the auditor to the experts engaged by him. The letter should have clarity and be specific in the matter on which he seeks an opinion. The letter should contain the terms of reference, time frame within which the opinion is to be obtained and a categorical statement that the auditor might consider and rely upon the opinion of the expert in forming his opinion on the company as a whole.

Letters to shareholders

Letters to shareholders are issued by the auditor if the situation so warrants. In case the management infringes into his independence or in case he unearths a fraud played by the management, he may go to the shareholders.

Certain of the matters cannot be mentioned in the audit report because of confidentiality and the strict code of conduct, which prohibits the auditor to divulge any information obtained by the auditor to a third party, unless he is required so to do by law.

The profession also requires the auditor to communicate to the shareholders of any frauds by the management, even if the loss is made good by the management. Letter to the shareholder could be one of the options available to the auditor.

(The author is a Hyderabad-based chartered accountant.)

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In what would translate into increased entitlement for employees, the government today enhanced the income tax exemption limit on gratuity from Rs 3.5 lakh to Rs 10 lakh, with effect from May 24.

“Employees who retire, become incapacitated, terminated, or die on or after May 24, 2010, will get I-T exemption for gratuity up to Rs 10 lakh,” the finance ministry said in a statement, notifiying the rule related to gratuity.

The Payment of Gratuity (Amendment) Bill, 2010, relating to the exemption was passed by Parliament in the Budget session. Initially, the Sixth Pay Commission had raised the limit for central government employees and the Cabinet later extended it for the private sector employees as well. The Payment of Gratuity Act, 1972, applies to factories and other establishments employing 10 or more persons. On completion of five years service, the employees are entitled to payment of gratuity at the rate of 15-day wages for every completed year of service or part of it in excess of six months subject to a maximum of Rs 3.5 lakh. However, gratuity is considered an income and the employee who receives it is liable to pay tax on it. However, gratuity up to Rs 3.5 lakh is exempt from tax under the provisions of Section 10(10) of the Income Tax Act, 1961.

 

 

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Acknowledgement for e-Return and non e-Return Forms to be submitted by Scientific Research Organisations Application Form for approval under clause (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961 in the case of a Scientific Research Association FORM NO.3CF-I Application for approval of scientific research programme under section 35(2AA) of the Income-tax Act, 1961 FORM NO. 3CG Order of approval of in-house Research and Development facility under section 35(2AB) of the Income-tax Act, 1961 FORM NO. 3CM Certificate of expenditure by way of payment in respect of eligible projects or schemes notified under section 35AC FORM NO. 58A Certificate of expenditure incurred directly by a company in respect of eligible projects or schemesnotified under section 35AC FORM NO. 58B Report to be submitted under clause (ii) of sub-section (4) of section 35AC of the Income-tax Act, 1961 to the National Committee by an approved association or institution FORM NO. 58C Report to be submitted by a public sector company, local authorityor an approved association or institution under clause (ii) ofsub-section (5) of section 35AC of the Income-tax Act,1961 to the National Committee on a notifiedeligible project or schemeReporting period ________to__________ FORM NO. 58D Application Form for approval under clause (ii) or clause (iii) of sub-section (1) of section 35 of the Income-tax Act, 1961 in the case of a University, College or other Institution FORM NO. 3CF-II Forms to be submitted by Charitable and Religious Organisations under Section 10 Application for grant of exemption or continuance thereof under section 10(23C)(iv) and (v) for the year FORM NO. 56 Application for grant of exemption or continuance thereof under section10(23C)(vi) and (via) for the year ___________ FORM NO. 56D Forms to be submitted for registration of Charitable or Religious Institutions Application for registration of charitable or religious trust or institution under section 12A(a) of the Income-tax Act, 1961 FORM NO. 10A Software Utilities Software utility for printing of challans with Barcoded PAN/TAN and other details. Download Publications e-Delivery of Services Download

 

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Special Placement Programme – June, 2010 for experienced and fresh Chartered Accountants 22nd – 26th June,2010

OBJECTIVE

As a measure to develop employment opportunities for Chartered Accountants, Committee for Members in Industry (CMII) of ICAI has been successfully organizing placement programmes twice a year for Newly Qualified Chartered Accountants, wherein prospective employers and new members interact and explore the possibility of taking up employment careers in various organisations.

Special Placement Programme is a step ahead as an extension to the same programme but with a different objective. It aims at providing the experienced Chartered Accountants with a platform to assess their potential and refinement in work, which they have acquired during their working tenure.

Special Placement Programme also provides a unique opportunity to Chartered Accountants who have no or less than one year experience as fresh Chartered Accountant. For the first time CMII has taken an initiative to organize a separate Special Placement Programme of this nature for Chartered Accountants.

MEET THE COMPLETE BUSINESS PROFESSIONALS: CHARTERED ACCOUNTANTS

Chartered Accountants are considered as complete business solution providers in this dynamic business world. They are thoroughly trained practically in all avenues of finance and accounting, auditing, finance and management and information technology. They can undertake responsibilities ranging from carrying out feasibility study, raising financial resources, compliance with regulatory framework, capital structure and planning, organizational development, installation of efficiency accounting, budgetary control, information system apart from giving advice on complex issues such as joint ventures, foreign collaborations, amalgamation, merger, diversification, modernization, product pricing, BPO, KPO, restructuring, etc.

SPECIAL PLACEMENT PROGRAMME – A GREAT ADVANTAGE FOR CORPORATES

If you are looking for complete business solution provider, then end your search by participating in Special Placement Programme for experienced and fresh Chartered Accountants. wherein you would have access to a vast database of Chartered Accountants.

The event would provide the companies to select Chartered Accountants as per their requirement criterion.

Possible care would be taken to maintain the confidentiality of the candidates during the entire process.

ELIGIBILITY OF CANDIDATES FOR SPECIAL PLACEMENT PROGRAMME

Chartered Accountants fulfilling the following conditions are eligible to take part in Special Placements.   ·        having the membership of Institute as on 10th May, 2010 ·        who have more than one year of experience may participate as experienced chartered accountants. ·        The chartered accountants who have less than one year or no experience may participate as fresh Chartered Accountant ·        passed C.A. final examination on or before January, 2010 ·        who have not got the job through any placement services organized by the Institute, i.e., from 01.06.2009 to 1.06.2010.   Important Dates for Special Placement Programme Start Date for candidate registration: 17th May, 2010 Last date for candidate registration: 31st May, 2010 Start Date for company registration: 19th April, 2010 Opening of database for Companies: 8th June, 2010 Campus Interview Dates   Category  Centre Dates A Mumbai and New Delhi, 25th -26th  June,2010 B Bangalore, Chennai, Kolkata and Hyderabad 23rd -24th June,2010 C Jaipur and Pune 22nd June,2010   Centre Maximum No. of companies in any single day Last Date of Registration for Companies * Upto 05:00 PM Last Date of Short-listing by Companies Upto11:00 PM Consent sending by Candidates# Mumbai & New Delhi 6 10th June 2010   14th June 2010   17th -21st  June 2010 Bangalore, Chennai, kolkata & Hyderabad  6 10th June 2010   14th June 2010   17th -21st June 2010 Jaipur & Pune 5 10th June 2010   14th June 2010   16th -18th June 2010

GUIDELINES FOR THE PARTICIPATING ORGANISATIONS

Timings of the event: 10.00 a.m. to 6.00 p.m. The companies participating will have to register online on placement portal www.cmii.icai.org on or before 10th June, 2010. The participation fees should be remitted at ICAI head office New Delhi only. The fee is not refundable. Access to the candidate database shall be allowed only after the receipt of participation fee by CMII Secretariat latest by 10th June, 2010. Fee is chargeable in case a recruiting organization withdraws after confirming the participation and data access has been given. The companies can access the database through the placement portal www.cmii.icai.org from 8th June, 2010. Participating companies will have to provide the list of shortlisted candidates online on placement portal www.cmii.icai.org by 14th June, 2010. Final list of candidates appearing for interview will be available online on placement portal www.cmii.icai.org one day after consent date by candidate at respective centres. Shortlisting of the candidates by the company is restricted to 10 times of the number of vacancies in that particular organization Once a company has selected any candidate and the offer is accepted by the candidate it is the responsibility of the company to inform the organizers and providing the offer letter duly signed by them to the and the candidate who had accepted the offer. The companies participating have to offer a minimum CTC of Rs.6.00 lakhs to the candidates in Special Placements. Only one room will be provided to each company for the conducting of Interview process. Kindly note that no GD/Written Test/Psychometric Test will be conducted prior to Interview Process on the scheduled day. The entire process above would be done online on placement portal www.cmii.icai.org.

PARTICIPATION FEES FOR SPECIAL PLACEMENTS Participation at Fee per centre per day Day 1 Day 2 a.         Mumbai and New Delhi Rs. 2,00,000 Rs. 1,50,000 b.        Chennai, Kolkata, Bangalore & Hyderabad Rs. 1,50,000 Rs. 1,00,000 c.         Jaipur  and  Pune Rs 60,000 NA

Payment Terms: Participation fee shall be payable by way of Cheque / Demand Draft in favour of ‘The Secretary, The Institute of Chartered Accountants of India’ payable at New Delhi and should be sent to Shri Shaleen Suneja, Secretary, CMII, The Institute of Chartered Accountants of India, ICAI BHAWAN, Indraprastha Marg, New Delhi-110 002 so as to reach on or before 10th June, 2010. Kindly also note that the PAN No. of Institute is AAAAT7798M and Service Tax Registration No. is AAAAT7798MST003 (DL-I/ST/MP/R-II/1530/ICA/2006).

GUIDELINES FOR THE CANDIDATES Timings of the event: 10.00 a.m. to 6.00 p.m. The candidates have to register online with Placement portal www.cmii.icai.org. No registration (participation) fees would be charged from the candidates. The last dates for filling up online application forms for the candidates, shortlising details, consents for appearing in the interviews of the various participating organizations will be as per the details mentioned above. There is no restriction on the number of interviews a candidate can attend. Once finally selected by any company and accepting the offer by signing the offer letter, the candidate cannot appear for any other interview or accept job from the recruiting organisation that have interviewed him/her earlier. The candidates would be provided with waiting cum refreshment lounge at the venue The entire process above would be done online on placement portal www.cmii.icai.org .

For details contact:

 

 Indicative list of sectors from which the prominent organizations participated in the past Placement Programmes of ICAI

 

Auto Ancillaries Auto Manufacturing – Heavy Vehicles Auto Manufacturing – Other Vehicles Banking Business Process Outsourcing Cement Chemicals Consumer Electronics& Durables Courier Services Dairy & Food Products Diversified Drugs and Pharmaceuticals Engineering Procurement and Construction Fertilisers Financial Services FMCG Health Services Heavy Engineering Information Technology – Hardware Information Technology –Software Mining Mutual Funds NBFC Oil & Gas Exploration Oil & Gas Refining Power Generation and Distribution Print Media & Entertainment Shipping Steel & Metal Manufacturing Telecommunication Textile Manufacturing Trading Transport-All Types

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Disclaimer: The CMII of ICAI reserves the right to change its policy at any point of time as per its discretion.