Certification Certification ofof

Accounts Accounts

Certification of accountsCertification of accounts» Audit Report on Financial (Attest) Audit Report on Financial (Attest)

Audit is about expression of Audit is about expression of Auditor’s Opinion on the Financial Auditor’s Opinion on the Financial Statements. The opinion is Statements. The opinion is expressed in a prescribed format.expressed in a prescribed format.

» The present format certifies the The present format certifies the accounts to be “Correct” in the accounts to be “Correct” in the case of Finance Accounts, and case of Finance Accounts, and “True and Fair” in case of others “True and Fair” in case of others (Govt companies, corporations, (Govt companies, corporations, autonomous bodies etc.)autonomous bodies etc.)

Opinion and basis of Opinion and basis of accountingaccounting

» Properly presentsProperly presents i.e. i.e. correct-correct- used when the used when the financial statements have been prepared on a financial statements have been prepared on a cash basis, reflecting the very low level of cash basis, reflecting the very low level of judgement required due to in preparing financial judgement required due to in preparing financial statements on a cash basis.statements on a cash basis.

» Presents fairlyPresents fairly - used when the financial - used when the financial statements have been prepared on a partial statements have been prepared on a partial accruals basis and are not intended to give a true accruals basis and are not intended to give a true and fair view. This form of words reflects the fact and fair view. This form of words reflects the fact that though some element of judgement has that though some element of judgement has been used in preparing the financial statements, been used in preparing the financial statements, the audit opinion is distinct one on accounts the audit opinion is distinct one on accounts which give a true and fair view.which give a true and fair view.

» Presents true and fair viewPresents true and fair view - used when the - used when the financial statements have been prepared on a full financial statements have been prepared on a full accruals basis and intended to give a true and accruals basis and intended to give a true and fair view.fair view.

Format of Audit certificateFormat of Audit certificate

» Normally, the audit reports on Normally, the audit reports on completion of financial audit will be in completion of financial audit will be in the form of audit certificates. the form of audit certificates.

» However, in appropriate cases, a However, in appropriate cases, a detailed report can be annexed to the detailed report can be annexed to the audit certificate. audit certificate.

» In case the format of audit certificate is In case the format of audit certificate is prescribed under the provisions of any prescribed under the provisions of any law or engagement, such prescribed law or engagement, such prescribed format shall be used. format shall be used.

Audit opinionAudit opinion

» The audit opinion will also contain The audit opinion will also contain separate sections dealing with:separate sections dealing with:» respective responsibilities of the respective responsibilities of the

executive and auditorsexecutive and auditors» the basis of the opinion expressedthe basis of the opinion expressed» the opinion on the financial the opinion on the financial

statements.statements.

Basis of OpinionBasis of Opinion» The audit certificate should include a statement The audit certificate should include a statement

expressly setting out the basis of the audit opinion. expressly setting out the basis of the audit opinion. This will include:This will include:

» a statement certifying that the auditor has performed a statement certifying that the auditor has performed his examination in accordance with relevant his examination in accordance with relevant legislative authority - where there is a legal legislative authority - where there is a legal requirement for him to certify;requirement for him to certify;

» a statement as to compliance or otherwise with a statement as to compliance or otherwise with Auditing Standards, together with the reasons for any Auditing Standards, together with the reasons for any departure therefrom;departure therefrom;

» a statement that the audit process includes a statement that the audit process includes examining, on a test basis, evidence relevant to the examining, on a test basis, evidence relevant to the amounts, disclosures and regularity of transactions amounts, disclosures and regularity of transactions included in the financial statements; andincluded in the financial statements; and

» a statement that the audit is planned and performed a statement that the audit is planned and performed so as to obtain reasonable assurance that the financial so as to obtain reasonable assurance that the financial statements are free from material misstatement.statements are free from material misstatement.

Expression of opinion Expression of opinion » The audit certificates should contain a clear The audit certificates should contain a clear

expression of opinion on both the truth and expression of opinion on both the truth and fairness/proper presentation/fair fairness/proper presentation/fair presentation (as appropriate) and the presentation (as appropriate) and the regularity of the transactions recorded in the regularity of the transactions recorded in the financial statements. financial statements.

» ‘‘Truth’ refers to correctness of those matters Truth’ refers to correctness of those matters capable of being determined with precision capable of being determined with precision such as the balance of cash at bank etc.such as the balance of cash at bank etc.

» The concept of ‘fairness’ is linked with a set The concept of ‘fairness’ is linked with a set of standards which provide a framework of standards which provide a framework within which judgment can be exercised to within which judgment can be exercised to report on the entity’s financial status in report on the entity’s financial status in fairness.fairness.

UnqualifiedUnqualified opinionopinion

n An unqualified opinion is given An unqualified opinion is given when, in the judgement of the when, in the judgement of the Auditor, the financial statements Auditor, the financial statements properly present receipts and properly present receipts and payments or give a true and fair payments or give a true and fair view and have been prepared in view and have been prepared in accordance with relevant accordance with relevant accounting requirements. accounting requirements.

Qualified opinion- IQualified opinion- I» The audit opinion should be qualified The audit opinion should be qualified

where the Auditor is unable to satisfy where the Auditor is unable to satisfy himself that the financial statements are himself that the financial statements are free from material misstatement whether free from material misstatement whether caused by fraud, error or other irregularity. caused by fraud, error or other irregularity.

» E.g. For Appropriation Accounts a qualified E.g. For Appropriation Accounts a qualified opinion is also given on all Excess votes.opinion is also given on all Excess votes.

» Three types of opinion can be given as Three types of opinion can be given as qualfied opinions - ‘except for’, ‘adverse’ qualfied opinions - ‘except for’, ‘adverse’ and ‘disclaimer of opinion’. and ‘disclaimer of opinion’.

Types of Audit OpinionTypes of Audit Opinion

Type of Type of opinionopinion

SignalSignal InterpretationInterpretation

UnqualifiedUnqualified FavourableFavourable True and fair True and fair viewview

Except forExcept for Favourable Favourable with a with a qualificationqualification

True and fair True and fair view, but for view, but for certain itemscertain items

AdverseAdverse UnfavourablUnfavourablee

Not true and Not true and fair, misleadingfair, misleading

Disclaimer of Disclaimer of OpinionOpinion

Neither Neither favourable favourable nor nor unfavourablunfavourablee

Unable to Unable to express any express any opinion at allopinion at all

Some important points Some important points about Certificateabout Certificate

» The audit certificate should be positioned The audit certificate should be positioned immediately before the financial statements and immediately before the financial statements and immediately after the statement of executive’s immediately after the statement of executive’s (directors' or management’s) responsibilities.(directors' or management’s) responsibilities.

» The Auditor should not sign the certificate The Auditor should not sign the certificate and/or express audit opinion until the financial and/or express audit opinion until the financial statements and all other financial information statements and all other financial information contained in a report of which the audited contained in a report of which the audited financial statements form a part have been financial statements form a part have been approved by the accounting officer, board, or approved by the accounting officer, board, or equivalent persons and he has considered all equivalent persons and he has considered all necessary available evidence. necessary available evidence.

» The date of a certificate on financial statements The date of a certificate on financial statements is the date on which the auditor signs the report is the date on which the auditor signs the report expressing his opinion on those statements.expressing his opinion on those statements.