Recertification of the revised accounts of a unit where the statutory auditors of the company

considered the changes made in such accounts while submitting their report

1.The querists were appointed as the auditors of some units of a government company by the Company Law Board. Certain queries were raised by the government auditors subsequent to the certification by the querists in respect of the accounts of concerned units. They were not called upon to recertify the accounts based on the changes recommended by the government auditors. Accordingly, they forwarded the supplementary report under section 619 (3) of the Companies Act, 1956.

2.The querists were later informed by the company that changes were effected at the time of consolidation in the accounts of the concerned units in consultation with the statutory auditors and government auditors. They were therefore requested to re-certify the accounts so as to fall in line with the figures adopted at the time of consolidation. The government auditors have also sought the supplementary report under section 619 (3) of the Act to be re-submitted based on the revised accounts (which would involve re-certification). The Annual General Meeting of the company was over before the requests were made.

3. The querists have sought the opinion of Expert Advisory Committee as to whether it is necessary for the querists to re-certify the accounts of the concerned units at this stage, incorporating the changes effected to the unit’s accounts at the time of consolidation by the statutory auditors?

Opinion December 31, 1985

1.The Committee notes that section 228 (3) (c) of the Companies Act, 1956 provides that “the branch auditor shall prepare a report on the accounts of the branch office examined by him and forward the same to the company’s auditor who shall, in preparing the auditor’s report, deal with the same in such manner as he considers necessary.” The Committee also notes that section 619 (4) of the Act requires submission of a copy of the branch auditor’s report to the C & AG.

2.On the basis of the above, it is apparent that statutory auditor has to consider the branch auditor’s report for the purpose of expressing his opinion in his report in respect of the accounts of the company as a whole. Thus, where changes are effected in the accounts of a branch after the branch auditor has submitted his report, but before the submission of the report by the statutory auditors, it is the duty of the statutory auditors, in the view of the Committee, either to seek a revised report from the branch auditors or, failing that, to satisfy themselves that the changes are proper.

3.The Committee is therefore of the opinion that in the circumstances of the present query since the statutory auditors have already submitted their report after considering and incorporating changes in the branch accounts, it is not obligatory for the branch auditors to submit a revised report on the revised accounts of the branch. The Committee however notes that the accounts adopted at the Annual General Meeting incorporated the revised figures in relation to the branch. In view of this, the Committee is of the opinion that the branch auditors are not legally barred from sending a fresh report on the branch accounts presented to them a revised by the management and as incorporated in the company’s accounts approved at the Annual General Meeting.

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