Section 143 of the Companies Act, 2013 mandates that the auditors’ report must indicate whether the company has an adequate internal financial controls system and whether these controls are operating effectively. In this context, we explore the challenges of obtaining sufficient and necessary audit evidence and documentation related to IFCFR. Additionally, we address the complexities that joint auditors face in coordinating their responsibilities during the audit.
AASB Suggestion
In this regard, AASB provided that:
| Key Points | Description |
|---|---|
| Mandate of Section 143 | Auditors are mandated to report on the adequacy and operating effectiveness of a company’s internal financial control systems. This requires a detailed audit approach and comprehensive documentation. |
| Documentation Guidelines | Auditors should document the work performed on internal financial controls over Financial Reporting (FR) to provide a sufficient and appropriate record of the basis for the auditor’s report. |
| Relevance of SA | While Standards on Auditing (SAs) don't entirely cover IFCFR reporting requirements, they offer crucial guidance, such as SA200, SA315, and SA230, emphasizing the necessity of proper audit documentation. |
| Responsibilities of Joint Auditors | Joint auditors must coordinate their efforts to ensure comprehensive and compliant audit outcomes. This involves documenting the division of work, adhering to audit documentation requirements, and considering additional factors such as division of work, coordination, relationship among joint auditors, and reporting responsibility. |
Conclusion
Strengthening audit practices for internal financial controls requires meticulous documentation and coordination among auditors. The guidelines provided by AASB emphasize the importance of comprehensive documentation to meet reporting requirements and ensure compliance with professional standards. Additionally, joint auditors must effectively divide responsibilities and communicate clearly to achieve a smooth audit process.
