What is a Public limited company? According to section 2(71) of Companies Act, 2013 Public company has separate legal entity that permits its shares to be traded on the market for the public to take a position in it. According to the provision of Companies Act 2013, it is compulsory for a Public Limited Company to show the financial position i.e, Balance sheet and estimation to the public to maintain the level of transparency. Hence, a public limited company needs get its accounts audited by the Chartered Accountant(CA) or to the persons who are eligible to act as auditors according to the Companies Act, 2013. The primary objective to audit of the public limited is to determine whether a Company is providing correct representation of its financial state of affairs and they comply the provision of Companies Act, 2013. It can be determined by examining the information provided to the Auditor, such as books of account, statements of bank account, and financial statements.
Public limited company must go through an audit process for each financial year. It does not matter what nature of business public limited is conducting or irrespective of amount of turnover, the Public companies must get their Books audited for each financial year.
Pubic limited companies must get their annual accounts audited each year by independent auditors according to section Section 143 of the companies Act, 2013.
In conduct to audit of Public Limited, the auditors conduct a examination of the Company’s books of accounts, transaction entered by the company during the year, and every other documents.
During the audit of public limited, it is clarified whether the financial statements are fairly presented and free from material misstatements.
The opinions prepared by the auditors on the financial statements and are available to the investors and other interested parties.
The main objective of the public limited audit is to provide reasonable assurance to investors, capital market participants, and policymakers so, they can make investment in the Company and take appropriate investment decision on the basis of Auditors Report.
What are the steps to conduct the audit of Public Limited? The procedure to conduct audit of Public Limited is as follows:
Examination of Minutes:The Auditor should examine the minutes book of the respective company, especially of those items that have related to the books of accounts.
Examination of profit and loss Accounts:The Auditor in conduct of audit of a public limited must verify and compare the profit and loss account with that of the previous year’s audited financial statements to find the cause of deviation between two periods.
Comparison of expenses:The Auditor compares the Changes occurred in the expenses between the two periodsto identify the cause of variations during the two period under audit.
Variation:The Auditor should check the reason of any deviation in the gross net profit and pay attention to the valuation of closing stock.
Valuation of Asset:The Auditors should check whether there is any substantial change in the fixed assets that compared with pervious year, especially regarding the valuation of assets.
Enquiry in Variation of asset:The Auditor needs to inquire into any variation in the current assets as compared to the previous years and check whether any material discrepancies has been found and if yes then How the Company dealt with it in the books of accounts.
Examination of prepayment and Accruals:The Auditors check whether there is any material alteration in the pre-payments and accruals, and identify those variation and report client to make proper adjustment in the books of accounts.
Examination of other items:Auditor check whether there is any change in the other items of balance sheet and check whether there is any deviation or substantial change from the usual figure present in the balance sheet.
Verification of other asset and Liabilities:The Auditor must verify that assets and liabilities which are owed by the company in their name and report it according to the requirement of CARO, 2020.
Commitment and losses:The Auditors review whether any capital present in the company and there is any subsequent loss may arise so, auditor check whether appropriate provision has been made by company if any.
Who can be the Auditor of Public Company? Following below are the persons who can be appointed as an auditor of a public company:
An Independent Chartered Accountant (CA) with Certificate of Practice (COP).
A Firm of Chartered Accountants
The firm with features of Limited liability partnership can be appointed as an auditors of the company with the condition that majority of partners should be practicing in India.
Written by – Shivam Verma
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