Auditor Report: Applicable for the financial year 2019-20

Auditor Report Format (Applicable for the financial year 2019-20)

1. Going Concern
(a) If there exists material uncertainty related to going concern and adequate disclosure is made about the matter and management plan in financial statement than a separate paragraph/section to be included in auditor report.
Material Uncertainty Related to Going Concern
We draw attention to Note X in the financial statements, which [describe material uncertainty]. As stated in Note X, these events or conditions, along with other matters as set forth in Note X, indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
(b) If there exists material uncertainty related to going concern and adequate disclosure of material uncertainty is not made in the financial statement than Qualified or Adverse opinion should be given. Rhinocort aqua
(c) If there is no material uncertainty relating to going concern however was specifically considered by the auditor during the audit than the said can be included in Key Audit Matters (KAM): Mandatory for Listed Companies only – however, it may be voluntarily given by any company auditor

2. Inventory Verification

(a) Primary responsibility is of auditor to attend inventory counting. Even when the auditor has opted for alternative procedure, the auditor is not absolved of the responsibility.
(b) Implication of inability to attend inventory counting:
– If alternative audit procedure provide sufficient appropriate audit evidence, opinion need not be modified.
– If not able to perform alternative audit procedure, the opinion shall be modified.
As per MCA notification dated 13th June 2017, exemption from Internal Financial Controls to following private companies:
1. which is one person Company (OPC) or a Small Company; or
2. which has turnover less than Rs. 50 Crores as per latest audited financial statement AND which has aggregate borrowings from banks or financial institutions or any body corporate at any point of time during the financial year less then Rs. 25 Crore.
Further, the above exemptions available to Private Company under section 143(3)(i) would be available only if private company has not committed a default in filing its financial statements under section 137 of the said Act or annual return under section 92 of the said Act with the ROC. Levitra online
CARO, 2020 has been issued however it is effective from the financial year commencing on or after 1st April, 2020. Therefore for the financial year 2019-20, CARO 2016 continues to be followed:
CARO 2016 is applicable to all the companies including a foreign Company except the following (which) are specifically excluded from its purview:

  • Banking Company
  • Insurance Company
  • Company licensed to operate under Section 8 of the Companies Act 2013 (Companies registered with charitable object).
  • A one-person company (OPC)
  • A small company under Section 2 (85) of the Companies Act, 2013 (Companies with Paid up capital less than or equal to Rs. 50 Lakhs and Last reported turnover less than or equal to Rs. 2 Crores)
  • A private company that satisfies the following conditions:
    • Not holding or subsidiary company of a public company;
    • Having paid up capital and reserve and surplus not more than Rs 1 Crore as on the balance sheet;
    • Not have total borrowing exceeding Rs. 1 crore from any bank and financial institution at any point of time during the financial year;
    • Not have total revenue exceeding Rs 10 Crore during the financial year;


  • One Person Company,
  • small company and
  • dormant company

(Published in Chartered Accountants Association Ahmedabad May 2019 Journal)

The following Standards of Auditing have been revised and shall be effective/applicable for audits of financial statements for periods beginning on or after April 1, 2018 (deferred by one year from earlier date of April 1, 2017):
  • SA 701 Communicating Key Audit Matters in the Independent Auditor’s Report
  • SA 705 Modifications to the Opinion in the Independent Auditor’s Report
  • SA 706 Emphasis of Matter paragraph & Other matter Paragraph in Independent Auditor’s Report
  • SA 720 The Auditor’s Responsibilities Relating to Other Information



Seq. No. Old Format New Format
1. Title and Addressee Title and Addressee
2. Subtitle: Report on the Financial Statements Subtitle: Report on the Audit of the Financial Stat.
3. Introductory Paragraph Auditor’s opinion (including introductory paragraph)
4. Management’s Responsibility Basis for opinion (mandatory)
5. Auditor’s Responsibility Emphasis matter (SA 706)
6. Basis for modified opinion, if any Material Uncertainty relating to Going Concern, if applicable (SA 570)
7. Auditor’s opinion Key Audit Matters, if applicable (SA 701)
8. Emphasis of matter Other Information if applicable (SA 720)
9. Other matter Management’s Responsibility
10. Report on other legal and regulatory requirements Auditor’s Responsibility for the Audit of the Financial Statements
11. Signature, date of the report and membership number and place of signature Other matter
12. Report on other legal and regulatory requirements
13. Signature, date of the report and membership number and place of signature

1. Opinion:
The most important part of the auditor’s report i.e. Opinion is now required to be positioned at the beginning of the audit report, followed by the Basis for Opinion.
2. Basis for Opinion (now Mandatory):

  • The Basis for Opinion section previously was required only when the auditor’s opinion was modified. Now, this section will be required for all auditor’s reports and will explain that the audit was conducted in accordance with the SAs and whether the audit evidence obtained is sufficient and appropriate to provide a basis for the opinion.
  • The Basis for Opinion section will also include a new affirmative statement that the auditor is independent of the entity and has fulfilled the auditor’s other relevant ethical responsibilities relating to the audit, which includes the Code of Ethics issued by the ICAI together with the ethical requirements that are relevant to the audit of the financial statements under the provisions of the Companies Act, 2013 and the Rules thereunder.

3. Material Uncertainty relating to Going Concern (where applicable)

When a material uncertainty related to going concern exists and disclosure in the financial statements are adequate, than separate section “Material Uncertainty relating to Going Concern” is required with explanation. Earlier this was reported within an Emphasis of Matter Paragraph.

Illustrative Paragraph of Material Uncertainty relating to Going Concern:

We draw attention to Note XX in the financial statements, which indicates that the company has accumulated losses and its net worth has been fully / substantially eroded, the Company has incurred a net loss/net cash loss during the current and previous year(s) and, the Company’s current liabilities exceeded its current assets as at the balance sheet date. These events or conditions, along with other matters as set forth in Note XX, indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Also, following point may be included in Report on Other Legal and Regulatory requirements paragraph.

As required by Section 143(3) of the Act, we report that: (f) The going concern matter described in material uncertainty related to going concern paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.

If the auditor concludes that there is a material uncertainty and the disclosure given in the financial statements are inadequate, the auditor should modify the audit report in accordance with the requirements specified in SA 705(Revised).

4. Key Audit Matters (mandatory for listed companies)

A new Key Audit Matters (KAMs) section for audits of listed entities and circumstances when the auditor otherwise decides to communicate key audit matters in the auditor’s report; and when the auditor is required by law or regulation to communicate key audit matters in the auditor’s report. The auditors have to describe in their public reports what they saw as the matters of most significance in the audit, and how those matters were addressed in the audit.  The new Key Audit Matters section is the centerpiece of the revised auditor’s report, and the subject of a new separate standard, SA 701.

Extract from Raymond Limited 2018-19 Auditor Report

We have determined the matters described below to be the key audit matters to be communicated in our report.

Key audit matter

How our audit addressed the key audit matter
Impairment testing of investments in joint venture

Refer Note 5, 14 and 34 to the accompanying standalone financial statements As at 31 March 2019, the carrying amount of investment in a joint venture company viz. Raymond UCO Denim Private Limited (the ‘joint venture’) is ` 4,420.79 lakhs (net of provision for diminution in the value of investment of ` 13,800 lakhs). Further, the Company has also invested in preference share capital of the joint venture, the carrying amount of which as at 31 March 2019 is ` 8,378.19 lakhs.
The net worth of the joint venture as at 31 March 2019 is fully eroded. Management has considered that the losses suffered by the joint venture and erosion of its net worth indicates a possible impairment in the carrying value of investment.
Accordingly, the management has performed an impairment assessment and has estimated the recoverable amount of its investment in the joint venture using ‘Discounted Cash Flow valuation model’, which is complex and involves the use of significant management estimates and assumptions that are dependent on expected future market and economic conditions.
As per such assessment done by the management, the carrying value of the investment was impaired by ` 2,000 lakhs in the current year, as disclosed in Note 34 to the financial statements.
Considering the materiality of the amounts involved, the significant management judgement required in estimating the quantum of diminution in the value of investment and such estimates and judgements being inherently subjective, this matter has been identified as a key audit matter for the current year audit.Our procedures included, but were not limited to the following:
• Obtained an understanding of management’s process and evaluated design and tested operating effectiveness of controls around identification of indicators of impairment under Ind AS, and around valuation of the business of the joint venture to determine recoverable value of the said investment;
• Assessed the appropriateness of methodology and valuation model used by the management to estimate the recoverable value of investment in the joint venture;
• Assessed the professional competence, objectivity and capabilities of the valuation specialist engaged by the management;
• Assessed the reasonableness of assumptions relating to revenue growth rate, gross margins, discount rates etc. based on historical results, current developments and future plans of the business estimated by management using expertise of our valuation specialist on required parameters;
• Assessed cash flow forecasts to ensure consistency with current operations of the Company and performed sensitivity analysis on key assumptions used in management’s calculated recoverable value.
Based on our procedures, we also considered the adequacy of disclosures in respect of investment in the said joint venture in the notes to the standalone financial statements.

5. Other Information (where applicable)

A new section on Other Information (where applicable) in accordance with requirements of SA 720(Revised), The Auditor’s Responsibilities relating to other Information. Other information is referred as Financial or non-financial information (other than financial statements and the auditor’s report thereon) included in an entity’s annual report.

Examples of amounts and other items that may be included in other information:

  • Items in a summary of key financial results, such as net income, earnings per share, dividends, sales and other operating revenues, and purchases and operating expenses.
  • Capital expenditures by segment or division
  • Explanations of critical accounting estimates and related assumptions
  • Amounts involved in guarantees, contractual obligations, legal or environmental claims, and other contingencies
  • Identification of related parties and descriptions of transactions with them.
  • Explanations of critical accounting estimates and related assumptions.
  • General descriptions of the business environment and outlook.

Extract from Infosys Limited 2017-18 Auditor Report


Information Other than the Standalone Financial Statements and Auditor’s Report Thereon

The Company’s Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Board’s Report including Annexures to Board’s Report, Business Responsibility Report, Corporate Governance and Shareholder’s Information, but does not include the standalone financial statements and our auditor’s report thereon.

Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

6. Management’s Responsibility

This section of the auditor’s report is expanded to also identify those responsible for the oversight of the financial reporting process, when those responsible for such oversight are different from those who fulfill the responsibilities for preparing financial statements (in many cases, the audit committee). In this case, the heading of this section shall also refer to “Those Charged with Governance” or such term that is appropriate in the context of the legal framework applicable to the entity.

7. Auditor’s Responsibility

The detailed description of the auditor’s responsibilities is included in relation to specific matters, including fraud, internal control, accounting policies and accounting estimates, evaluating the overall presentation, structure and content of the financial statements and disclosures, group audits, and communications with those charged with governance.

Because of the increased length of this section, SA 700(Revised) includes a provision that certain components of this description may be presented in an appendix to the auditor’s report or, where law, regulation or applicable auditing standards expressly permit, by reference to a website of an appropriate authority.



Emphasis of Matter

Key Audit Matter

Other Matter

A matter appropriately presented or disclosed in the financial statements that, in the auditor’s judgment, is of such importance that it is fundamental to users’ understanding of the financial statements. A matter other than those presented or disclosed in the financial statements that, in the auditor’s judgment, is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report. Those matters that, in the auditor’s professional judgment, were of most significance in the audit of the financial statements of the current period
  • § Change in significant accounting policy
  • § Revenue recognition (measurement)
  • § Future outcome of exceptional litigation
  • § Impairment test


  • Change in Auditor: previous year figures are audited by previous auditor
  • Unaudited accounts of group entities in CFS
  • Appointment of auditor post year end


  • Asset Impairment
  • Revenue
  • Allowance for doubtful debt
  • Goodwill impairment
  • Valuation of inventories
  • Fixed assets including depreciation



As there is a major change in the auditor report, the auditors need to be careful in first year while issuing audit report for the year 2018-19. In case of listed companies, special attention is required of reporting Key Audit Matters. Overall, the changes in the audit report is a welcome step and will enhance communication between auditors and stakeholders.

Chintan Patel is CA, CPA(USA), CISA(USA), DISA, DIRM(ICAI) and certified Ind AS and FAFD by ICAI. He is Regional Council Member of WIRC of ICAI. He is partner of Naresh J. Patel & Co. having more than 18 years of post-qualification experience in Ind AS, IFRS, Companies Act, GST. He is an author of books Quick Guide to Ind AS, ICDS published by Taxmann and Speaker at more than 500 presentations.


  1. What should be the format for LLP, Trust(including Public Charitable Trust), Partnership Firms & Proprietory Firm (liable for Tax Audit)?

    • Format of Tax Audit report is governed by Income Tax Act. In case if you have to submit separate audit report like in case of LLP than one has to refer to Standard of Auditing (SA) 700 that provides format for Non-corporate entities.

  2. Is it necessary to have same place for signing balance sheet and signing Audit report. Can both place be different?

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