1.12     Query

Disclaimer of opinion in statutory auditors’ report- whether  true & fair

for the purpose of declaring bonus, income-tax, sales tax etc.

1.The statutory auditors’ report of a company contains, inter alia, the following statement:

“We are unable to state whether the said balance sheet and profit and loss account read together with the notes thereon give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view;

a) in the case of the balance sheet of the state of affairs of the company as at 31.3.1984; and

b) in the case of the profit and loss account, of the profit for the year ended on that date.”

2.The Report, along with the replies thereon, was placed before the Annual General Meeting of the company on 15^th December, 1987. The accounts together with the Directors’ Report, Auditors’ Report, comments of the Comptroller and Auditor General and addendum to Directors’ Report were adopted in the meeting as they were. The querist has submitted a copy of the audit report for the perusal of the Committee.

3.The same auditors while reporting on the accounts for the year ended 31.3.1983 gave a clear report stating that:

“in our opinion and to the best of our information and according to the explanations given to us, the said balance sheet and profit and loss account read together with the notes thereon, and subject to our comments and reservations in paragraphs (1) (a-j) above, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view.”

(a) in the case of the balance sheet of the state of affairs of the company as at 31.3.1983, and

(b) in the case of the profit and loss account, of the profit for the year ended on that date.”

4.The querist has, accordingly, requested the Committee to give its opinion whether the auditors’ report for the year ended 31^st March, 1984, can be treated as true and fair, for the purpose of declaring statutory bonus, payment of income-tax, sales tax etc.

                                                                  Opinion                                                  July 31, 1989

The Committee notes that the audit report in question submitted by the querist brings out in detail a large number of serious deficiencies in the accounting system and internal controls in the company. As a consequence of these qualifications, the auditors have expressed their inability to give an opinion on whether the relevant accounts give a true and fair view with regard to the operating results and the state of affairs of the company. The Committee is accordingly of the opinion that in view of the report of the auditors, the accounts subject thereto may not be considered to be true and fair for the purposes of declaration of bonus, payment of income-tax, sales tax etc.

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