Auditing

CHAPTER-1 INTRODUCTION

Economic decisions in every society must be based upon the information available at the

time the decision is made. For example, the decision of a bank to make a loan to a business is

based upon previous financial relationships with that business, the financial condition of the

company as reflected by its financial statements and other factors.

If decisions are to be consistent with the intention of the decision makers, the information

used in the decision process mu ! st be reliable. Unreliable information can cause inefficient 1

use of resources to the detriment of the society and to the decision makers themselves. In the

lending decision example, assume that the barfly makes the loan on the basis of misleading

financial statements and the borrower Company is ultimately unable to repay. As a result the

bank has lost both the principal and the interest. In addition, another company that could

have used the funds effectively was deprived of the money.

As society become more complex, there is an increased likelihood that unreliable informa-

tion will be provided to decision makers. There are several reasons for this: remoteness of

information, voluminous data and the existence of complex exchange transactions

As a means of overcoming the problem of unreliable information, the decision-maker must

develop a method of assuring him that the information is sufficiently reliable for these deci-

sions. In doing this he must weigh the cost of obtaining more reliable information against the

expected benefits.

A common way to obtain such reliable information is to have some type of verification (au-

dit) performed by independent persons. The audited information is then used in the decision

making process on the assumption that it is reasonably complete, accurate and unbiased.

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1.1 ORIGIN AND EVOLUTION

The term audit is derived from the Latin term audire, which means to hear. In early days an

auditor used to listen to the accounts read over by an accountant in order to check them

Auditing is as old as accounting. It was in use in all ancient countries such as Mesopotamia,

Greece, Egypt. Rome, U.K. and India. The Vedas contain reference to accounts and auditing.

Arthasashthra by Kautilya detailed rules for accounting and auditing of public finances.

The original objective of auditing was to detect and prevent errors and frauds

Auditing evolved and grew rapidly after the industrial revolution in the 18zcentury With the

growth of the joint stock companies the ownership and management became separate. The

shareholders who were the owners needed a report from an independent expert on the ac-

counts of the company managed by the board of directors who were the employees.

The objective of audit shifted and audit was expected to ascertain whether the accounts were

true and fair rather than detection of errors and frauds.

In India the companies Act 1913 made audit of company accounts compulsory. With the in-

crease in the size of the companies and the volume of transactions the main objective of au-

dit shifted to ascertaining whether the accounts were true and fair rather than true and cor-

rect. Hence the emphasis was not on arithmetical accuracy but on a fair representation of the

financial efforts

The companies Act.1913 also prescribed for the first time the qualification of auditors. The

International Accounting Standards Committee and the Accounting Standard board of the

Institute of Chartered Accountants of India have developed standard accounting and auditing

practices to guide the. accountants and auditors in the day to day work

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The later developments in auditing pertain to the use of computers in accounting and audit-

ing. In conclusion it can be said that auditing has come a long way from hearing of accounts

to taking the help of computers to examine computerised accounts

1.2DEFINITION

The term auditing has been defined by different authorities.

1. Spicer and Pegler: "Auditing is such an examination of books of accounts and vouchers

of business, as will enable the auditors to satisfy himself that the balance sheet is properly

drawn up, so as to give a true and fair view of the state of affairs of the business and that

the profit and loss account gives true and fair view of the profit/loss for the financial peri-

od, according to the best of information and explanation given to him and as shown by

the books; and if not, in what respect he is not satisfied."

2. Prof. L.R.Dicksee. "auditing is an examination of accounting records undertaken with a

view to establish whether they correctly and completely reflect the transactions to which

they relate.

3. The book "an introduction to Indian Government accounts and audit" "issued by the

Comptroller and Auditor General of India, defines audit an instrument of financial con-

trol. It acts as a safeguard on behalf of the proprietor (whether an individual or group of

persons) against extravagance, carelessness or fraud on the part of the proprietor's agents

or servants in the realization and utilisation of the money or other assets and it ensures on

the proprietor's behalf that the accounts maintained truly represent facts and that the ex-

penditure has been incurred with due regularity and propriety. The agency employed for

this purpose is called an auditor.

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1.3 FEATURES OF AUDITING

a. Audit is a systematic and scientific examination of the books of accounts of a busi-

ness;

b. Audit is undertaken by an independent person or body of persons who are duly quali-

fied for the job.

c. Audit is a verification of the results shown by the profit and loss account and the state

of affairs as shown by the balance sheet.

d. Audit is a critical review of the system of accounting and internal control.

e. Audit is done with the help of vouchers, documents, information and explanations

received from the authorities.

f. The auditor has to satisfy himself with the authenticity of the financial statements and

report that they exhibit a true and fair view of the state of affairs of the concern.

g. The auditor has to inspect, compare, check, review, scrutinize the vouchers support-

ing the transactions and examine correspondence, minute books of share holders, directors,

Memorandum of Association and Articles of association etc., in order to establish correctness

of the books of accounts.

1.4 OBJECTIVES OF AUDITING

There are two main objectives of auditing. The primary objective and the secondary or inci-

dental objective.

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a. Primary objective as per Section 227 of the Companies Act 1956, the primary duty (ob-

jective) of the auditor is to report to the owners whether the balance sheet gives a true and

fair view of the Companys state of affairs and the profit and loss A/c gives a correct figure

of profit of loss for the financial year.

b. Secondary objective it is also called the incidental objective as it is incidental to the sat-

isfaction of the main objective. The incidental objective of auditing are:

i. Detection and prevention of Frauds, and

ii. Detection and prevention of Errors.

Detection of material frauds and errors as an incidental objective of independent financial

auditing flows from the main objective of determining whether or not the financial state-

ments give a true and fair view. As the Statement on auditing Practices issued by the Institute

of Chartered Accountants of India states, an auditor should bear in mind the possibility of the

existence of frauds or errors in the accounts under audit since they may cause the financial

position to be mis-stated.

Fraud refers to intentional misrepresentation of financial information with the intention to

deceive. Frauds can take place in the form of manipulation of accounts, misappropriation of

cash and misappropriation of goods. It is of great importance for the auditor to detect any

frauds, and prevent their recurrence. Errors refer to unintentional mistake in the financial in-

formation arising on account of ignorance of accounting principles i.e. principle errors, or

error arising out of negligence of accounting staff i.e. Clerical errors.

""

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CHAPTER-2 ADVANTAGES AND DISADVANTAGES OF

AUDIT "2.1 ADVANTAGES OF AUDIT

"""""""

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2.2 GENERALLY FOLLOWING ARE THE LIMITATIONS OF

AUDITING

1. Non-detection of errors/frauds:- Auditor may not be able to detect certain frauds which

are committed with malafide intentions.

2. Dependence on explanation by others:- Auditor has to depend on the explanation and

information given by the responsible officers of the company. Audit report is affected ad-

versely if the explanation and information prove to be false.

3. Dependence on opinions of others:- Auditor has to rely on the views or opinions given

by different experts viz Lawyers, Solicitors, Engineers, Architects etc. he can not be an

expert in all the fields

4. Conflict with others: - Auditor may have differences of opinion with the accountants,

management, engineers etc. In such a case personal judgement plays an important role. It

differs from person to person.

5. Effect of inflation : - Financial statements may not disclose true picture even after audit

due to inflationary trends.

6. Corrupt practices to influence the auditors :- The management may use corrupt prac-

tices to influence the auditors and get a favourable report about the state of affairs of the

organisation.

7. No assurance :- Auditor cannot give any assurance about future profitability and

prospects of the company.

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8. Inherent limitations of the financial statements :- Financial statements do not reflect

current values of the assets and liabilities. Many items are based on personal judgement

of the owners. Certain non-monetary facts can not be measured. Audited statements due

to these limitations can not exhibit true position.

9. Detailed checking not possible :- Auditor cannot check each and every transaction. He

may be required to do test checking.

"2.3 ADVANTAGES OF AN INDEPENDENT AUDIT

The fact that audit is compulsory by law, in certain cases by itself should show that there

must be some positive utility in it. The chief utility of audit lies in reliable financial state-

ment on the basis of which the state of affairs may be easy to understand. Apart from this

obvious utility, there are other advantage of audit. Some or all of these are of considerable

value even to those enterprises and organization where audit is not compulsory, these advan-

tages are given below:

(a) It safeguards the financial interest of persons who are not associated with the manage-

ment of the entity, whether they are partners or shareholders.

(b) It acts as a moral check on the employees from committing defalcations or embezzle-

ment.

(c) Audited statements of account are helpful in setting liability for taxes, negotiating loans

and for determining the purchase consideration for a business.

(d) This are also use for settling trade disputes or higher wages or bonus as well as claims in

respect of damage suffered by property, by fire or some other calamity.

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(e) An audit can also help in the detection of wastage and losses to show the different ways

by which these might be checked, especially those that occur due to the absence of inade-

quacy of internal checks or internal control measures.

(f) Audit ascertains whether the necessary books of accounts and allied records have been

properly kept and helps the client in making good deficiencies or inadequacies in this re-

spects.

(g) As an appraisal function, audit reviews the existence and operations of various controls in

the organizations and reports weakness, inadequacy, etc., in them.

(h) Audited accounts are of great help in the settlement of accounts at the time of admission

or death of partner.

(i) Government may require audited and certificated statement before it gives assistance or

issues a licence for a particular trade.

""

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CHAPTER -3 THE IMPORTANCE OF AN AUDIT SYSTEM TO COM-

PANIES AND ACCOUNTING STANDARDS

3.1 THE IMPORTANCE OF AN AUDIT SYSTEM TO COMPANIES

Auditing is a means of evaluating the effectiveness of a company's internal controls.

Maintaining an effective system of internal controls is vital for achieving a company's

business objectives, obtaining reliable financial reporting on its operations, prevent-

ing fraud and misappropriation of its assets, and minimizing its cost of capital. Both

internal and independent auditors contribute to a company's audit system in different

but important ways.

Business Objectives

Having an effective audit system is important for a company because it enables it to

pursue and attain its various corporate objectives. Business processes need various

forms of internal control to facilitate supervision and monitoring, prevent and detect

irregular transactions, measure ongoing performance, maintain adequate business

records and to promote operational productivity. Internal auditors review the design

of the internal controls and informally propose improvements, and document any ma-

terial irregularities to enable further investigation by management if it is warranted

under the circumstances.

Risk of Misstatement

Auditors assess the risk of material misstatement in a company's financial reports.

Without a system of internal controls or an audit system, a company would not be

able to create reliable financial reports for internal or external purposes. Thus, it

would not be able to determine how to allocate its resources and would be unable to

know which of its segments or product lines are profitable and which are not. Addi-

tionally, it could not manage its affairs, as it would not have the ability to tell the sta-

tus of its assets and liabilities and would be rendered undependable in the market-

place due to its inability to consistently produce its goods and services in a reliable

fashion. Accordingly, an audit system is crucial in preventing debilitating misstate-

ments in a company's records and reports. 10

""Fraud Prevention

Internal audit serves an important role for companies in fraud prevention. Recurring

analysis of a company's operations and maintaining rigorous systems of internal con-

trols can prevent and detect various forms of fraud and other accounting irregularities.

Audit professionals assist in the design and modification of internal control systems

the purpose of which includes, among other things, fraud prevention. An important

part of prevention can be deterrence, and if a company is known to have an active and

diligent audit system in place, by reputation alone it may prevent an employee or

vendor from attempting a scheme to defraud the company.

Cost of Capital

The cost of capital is important for every company, regardless of its size. Cost of cap-

ital is largely comprised of the risk associated with an investment, and if an invest-

ment has more risk, an investor will require a higher rate of return to invest. Strong

audit systems can reduce various forms of risk in an enterprise, including its informa-

tion risk (the risk of material misstatement in financial reporting), the risk of fraud

and misappropriation of assets, as well the risk of suboptimal management due to in-

sufficient information on its operations.

"

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3.2 ACCOUNTING RECORDS AND FINANCIAL STATEMENT MAIN-

TAINED BY THE COMPANY

Good record keeping is an important part of monitoring business performance. It also

makes it easier for small business owners to meet their taxation obligations. Appro-

priate and up-to-date financial records provide the necessary information for manag-

ing the business efficiently and making sound business decisions.

To help you maintain your daily financial records, you should consider:

Setting up either a manual or electronic record keeping system that suits your

needs,

Recording your business transactions accurately and promptly, How to keep

daily financial records

Preparing a summary account (including income and expenditure) at the end of

each month.

Maintaining good financial records starts with a good system and well-organized

business records. The system can be a simple one and does not need to be complicat-

ed.

Disclosure of Accounting Policies

To ensure proper understanding of financial statements, it is necessary that all

significant accounting policies adopted in the preparation and presentation of

financial statements should be disclosed.

Such disclosure should formpart of the financial statements.

It would be helpful to the reader of financial statements if they are all dis-

closed as such in one place instead of being scattered over several statements,

schedules and notes.

Examples of matters in respect of which disclosure of accounting policies

adopted will be required are contained in paragraph 14. This list of examples is

not, however, intended to be exhaustive.

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Any change in an accounting policy which has a material effect should be dis-

closed. The amount by which any item in the financial statements is affected

by such change should also be disclosed to the extent ascertainable. Where

such amount is not ascertainable, wholly or in part, the fact should be indicat-

ed. If a change is made in the accounting policies which has no material effect

on the financial statements for the current period but which is reasonably ex-

pected to have a material effect in later periods, the fact of such change should

be appropriately disclosed in the period in which the change is adopted.

Disclosure of accounting policies or of changes therein cannot remedy a

wrong or inappropriate treatment of the item in the accounts.

"Main Principles

All significant accounting policies adopted in the preparation and presentation

of financial statements should be disclosed.

The disclosure of the significant accounting policies as such should form part

of the financial statements and the significant accounting policies should nor-

mally be disclosed in one place.

Any change in the accounting policies which has a material effecting the cur-

rent period or which is reasonably expected to have a material effect in later

periods should be disclosed. In the case of a change in accounting policies

which has a material effect in the current period, the amount by which any

item in the financial statements is affected by such change should also be dis-

closed to the extent ascertainable. Where such amount is not ascertainable,

wholly or in part, the fact should be indicated.

If the fundamental accounting assumptions, viz. Going Concern, Consistency

and Accrual are followed in financial statements, specific disclosure is not re-

quired. If a fundamental accounting assumption is not followed, the fact

should be disclosed.

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3.3 MEANING AND DEFINE OF AUDIT REPORT AND AUDIT CERTIFI-

CATE

Audit Report

An auditor, under Section 227 (2) of the Companies Act, 1956, is required to make a

report to the shareholders of the company whether the books of accounts examined by

him exhibit true and fair view of the state of affairs of the business.

The auditor submits his report to his client giving clear and concise information of the

result of audit performed by him. The fact or information contained in the auditor's

report is not available from any other source.

The statutory auditor of a company has to express his professional opinion about the

truth and fairness of the state of affairs of the company as shown by the Balance

Sheet and of the profit or loss as shown by the Profit and Loss Account in addition to

other information in his report.

Audit Certificate - Definition

The general purpose of an audit certificate is to give to the Commission reasonable

assurance that eligible costs (and, if relevant, the receipts) charged under the project

are calculated and claimed by the contractors in accordance with the relevant legal

and financial provisions of the FP6 legal texts, including contractual provisions.

When an auditor certifies a financial statement, it implies that the contents of the

statement are reliable as the auditor has vouched for the exactness of the data. The

term certificate is, therefore, used to mean confirmation of the truth and correctness

of something after a verification of certain exact facts. An auditor may therefore certi-

fy the circulating figures of a newspaper or the value of imports and exports of a

company.

The term certificate should not be confused with the term report'. While a certifi-

cate affirms the truth and correctness of a fact, figure or a statement, a report is gener-

ally a statement of facts or an expression of opinion regarding the truth and fairness

of the facts, figures and statements.

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Difference between Audit Report & Audit Certificate

1. A report means simply an expression of opinions Whereas a Certificate means that

the person issuing or signing the certificate vouchsafes the truth of the statement

made by him

2. The Auditor Report is based on facts, estimates and assumptions whereas Auditor's

Certificate is based on actual facts

3. Auditor Report is not a guarantee of the absolute correctness & accuracy of the

books of accounts. But the auditor certificate serves as a guarantee of the absolute

correctness & accuracy of the books of accounts

4. If the Auditor Report is later on found to be wrong, he cannot be held responsible

since he has given merely his opinion on the state of affairs of the company. But if the

duly signed certificate is found as wrong, he will be held responsible.

"""""""""""

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3.4 TYPE OF AUDIT REPORT

An audit report is an appraisal of a small businesss complete financial status. Com-

pleted by an independent accounting professional, this document covers a companys

assets and liabilities, and presents the auditors educated assessment of the firms fi-

nancial position and future. Audit reports are required by law if a company is publicly

traded or in an industry regulated by the Securities and Exchange Commission (SEC).

Companies seeking funding, as well as those looking to improve internal controls,

also find this information valuable. There are four types of audit reports.

1. Unqualified Opinion

Often called a clean opinion, an unqualified opinion is an audit report that is issued

when an auditor determines that each of the financial records provided by the small

business is free of any misrepresentations. In addition, an unqualified opinion indi-

cates that the financial records have been maintained in accordance with the standards

known as Generally Accepted Accounting Principles (GAAP). This is the best type of

report a business can receive.

Typically, an unqualified report consists of a title that includes the word indepen-

dent. This is done to illustrate that it was prepared by an unbiased third party. The

title is followed by the main body. Made up of three paragraphs, the main body high-

lights the responsibilities of the auditor, the purpose of the audit and the auditors

findings. The auditor signs and dates the document, including his address.

2. Qualified Opinion

In situations when a companys financial records have not been maintained in accor-

dance with GAAP but no misrepresentations are identified, an auditor will issue a

qualified opinion. The writing of a qualified opinion is extremely similar to that of an

unqualified opinion. A qualified opinion, however, will include an additional para-

graph that highlights the reason why the audit report is not unqualified.

""

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3. Adverse Opinion

The worst type of financial report that can be issued to a business is an adverse opin-

ion. This indicates that the firms financial records do not conform to GAAP. In addi-

tion, the financial records provided by the business have been grossly misrepresented.

Although this may occur by error, it is often an indication of fraud. When this type of

report is issued, a company must correct its financial statement and have it re-audited,

as investors, lenders and other requesting parties will generally not accept it.

4. Disclaimer of Opinion

On some occasions, an auditor is unable to complete an accurate audit report. This

may occur for a variety of reasons, such as an absence of appropriate financial

records. When this happens, the auditor issues a disclaimer of opinion, stating that an

opinion of the firms financial status could not be determine.

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3.5 ESSENTIALS OF GOOD AUDIT REPORT

The essentials of good audit report are as follows:

1. Title

An auditor report must have appropriate title, such as Auditors Report. It is helpful

for the reader to identify the auditors report. It is easy to distinguish it from other re-

ports. The management can issue any report about the business performance. The title

o the report is essential.

2. Addressee

The addressee may be shareholder or board of director of a company. The auditor can

audit financial statements of any business unit as per agreement. The report should be

appropriately addressed as required by engagement letter and legal requirements. The

report is usually addresses to the shareholders or the board of directors.

3. Identification

The audit report should identify the financial statement that have audited. The finan-

cial statement may include trading profit and loss accounts, balance sheet and state-

ment of changes in financial position and sources and application of frauds statement.

The report should include the name of the entity. Moreover the data and period cov-

ered by the financial statement are also stated in it.

4. Reference to Auditing Standards

The audit report should indicate the auditing standard or practice followed in con-

ducting the audit. The international auditing guidelines need assurance that the audit

has been conducted as per set standards.

5. Opinion

The auditors report should clearly state the auditors opinion on the presentation in

the financial statement of the entitys financial position and the result of its opera-

tions. The statement give a true and fair view is an auditors opinion. This opinion is

usually based on national standard or international accounting standards.

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6. Signature

The audit report should be signed in the name of the audit firm, the personal name of

the auditor or both as appropriate.

7. Auditors Address

The address of auditor is stated in the audit report. The name of city is stated in the

report for information of the readers.

8. Date of Report

The report should be dated. It informs the reader that the auditor considered the effect

on the financial statements and in his report of events or transactions about which he

become aware the occurred up to that date.

""Qualified audit reports

It is necessary to firstly identify the circumstances which can give rise to a qualifica-

tion.

These are as follows:

Uncertainty arising from either a limitation upon the scope of the auditors work or an

inability to obtain any evidence regarding doubts which exist in relation to an unre-

solved matter.

Disagreements arising from factual discrepancies, unsuitable accounting policies, in-

adequate or misleading disclosures given in the financial statements or failure to

comply with an accounting standard or legislation. Some of these types of disagree-

ment should be resolved fairly easily with the client so that a qualification can be

avoided, for example a factual disagreement should lead to the financial statements

being amended to reflect the correct view. Other types of disagreement which are

perhaps more subjective will be much more difficult to resolve such as those relating

to the suitability of an accounting policy.

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Secondly, it is necessary to decide upon the effect of the circumstances discussed

above.

These are classified as:

Those having a material but not fundamental effect upon the financial state-

ments

Those having a fundamental effect upon the financial statements.

Fundamental means that the matter is such as to seriously distort or undermine the

view which is given by the financial statements to the extent that they could mislead

user groups.

An except for qualification will be given when the matter is a material but not funda-

mental uncertainty or disagreement. An example of an uncertainty could be the de-

struction of a part of the clients accounting records leading to a limitation of scope

being imposed upon the auditors work because audit evidence is then unavailable. An

example of a disagreement under this heading could be a failure by a client to apply a

reasonable depreciation policy to a particular class of fixed assets, however in both of

these examples the effect is not pervasive to the view which the financial statements

give as a whole.

"

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3.6 GENERALLY ACCEPTED AUDITING STANDARDS

The generally accepted auditing standards (GAAS) are the standards you use for au-

diting private companies. GAAS come in three categories: general standards, stan-

dards of fieldwork, and standards of reporting.

Keep in mind that the GAAS are the minimum standards you use for auditing private

companies. Additionally, the Public Company Accounting Oversight Board (PCAOB)

has adopted these standards for public (traded on the open market) companies. Each

audit engagement you work on may require you to perform audit work beyond whats

specified in the GAAS in order to appropriately issue an opinion that a set of financial

statements is fairly presented. You need to use professional judgment and exercise

due care in following all standards.

General standards: The first three GAAS are general standards that address your

qualifications to be an auditor and the minimum standards for your work product:

As an auditor, you must have both adequate training and proficiency.

You are independent in both fact and appearance.

You exercise due professional care in performing your auditing tasks.

Standards of fieldwork: The next three GAAS govern how you actually do your job:

Your work is adequately planned, and all assistants are properly supervised.

You gain an understanding of the client and its environment, including internal

controls, to assess the risk of material misstatement in the financial statements

and to plan your audit.

The evidence you gather during the audit is appropriate and sufficient to eval-

uate managements assertions on the financial statements.

Standards of reporting: The last four GAAS concern information you must consider

prior to issuing your audit report:

You have to state whether the financial statements are prepared using generally

accepted accounting principles (GAAP).

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Just as important is to report whether GAAP are consistently applied for all

financial accounting. Should this not be the case, you have to report any depar-

tures.

You also have to make sure that disclosures any additional information

needed to explain the numbers on the financial statements are provided.

Lastly, you have to include your opinion as to whether the financial statements

present fairly in all material respects the financial position of the company under au-

dit.

"""

"

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CHAPTER-4 CASE STUDY ""TAJ HOTELS

"

"""

""""

Taj Hotels

Parent Company Indian Hotels Corporation

Category Hotels

Sector Tourism and Hospitality

Tagline/ Slogan Indias leading hospitality chain

USP Extravagant Indian Interiors

STP

Segment Leisure and business travelers

Target Group Upper class, business travelers

PositioningPrime location, luxury living with Indian values

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"4.1 INTRODUCTION

"The Indian Hotels Company (IHC) is the parent company of Taj Hotels Resorts

and Palaces. It was founded by Jamsetji N. Tata onDecember16, 1903. Currently the Taj

Hotels Resorts and Palaces comprises 57 hotels at 40 locations across India. Additional

18 hotels are also being operated around the globe. During fiscal year 2006, the total

number of hotels owned or managed by the Company was 75. The Taj hotels are catego-

rized as luxury, leisure and business hotels. The Taj Luxury Hotels offer a wide range

of luxurious suites with modern fitness centers, rejuvenating spas, and well-equipped

banquet and meeting facilities. The Taj Leisure Hotels offer a complete holiday package

that can be enjoyed with the whole family. It provides exciting activities ranging from

sports, culture, environment, adventure, music, and entertainment.The Taj Business Ho-

tels provide the finest standards of hospitality, which helps the business trips to be pro-

ductive.They offer well-appointed rooms, telecommunication facilities, efficient service,

specialty restaurants and lively bars,well-equipped business centres, and other confer-

ence facilities.

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""""

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4.3

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4.4 DRAFT OF AN AUDIT REPORT

INDEPENDENT AUDITORS REPORT

To, The Members

"Report on Financial Statements:

1. We have audited the accompanying Financial Statements of (the Company)

which comprise the Balance Sheet as at 31st March 2013 and Statement of Profit and

Loss for the year ended on that date, and a summary of significant accounting policies

and other explanatory information.

Managements Responsibility for the Financial Statements:

2. Management is responsible for the preparation of these Financial Statements that

give true and fair view of the financial position and financial performance of the

Company in accordance with the Accounting Standards referred to in sub section

(3C) of section 211 of the Companies Act, 1956 (the Act). This responsibility in-

cludes the design, implementation and maintenance of internal control relevant to the

preparation and presentation of the financial statements that give a true and fair view

and are free from material misstatement, whether due to fraud or error.

Auditors Responsibility:

3. Our responsibility is to express an opinion on these financial statements based on

our audit. We conducted our audit in accordance with the Standards on Auditing is-

sued by the Institute of Chartered Accountants of India. Those Standards require that

we comply with ethical requirements and plan and perform the audit to obtain reason-

able assurance about whether the financial statements are free from material mis-

statement.

4. An audit involves performing procedures to obtain audit evidence about the

amounts and disclosures in the financial statements. The Procedures selected depend

on the auditors judgement, including the assessment of the risks of material mis-

statement of the financial statement, whether due to fraud or error. In making those 27

risk assessments, the auditor considers internal control relevant to the companys

preparation and fair presentation of the financial statements in order to design audit

procedures that are appropriate in the circumstances. An audit also includes evaluat-

ing the appropriateness of accounting policies used and the reasonableness of the ac-

counting estimates made by management, as well as evaluating the overall presenta-

tion of the financial statements.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to

provide a basis for our Audit opinion.

Opinion:

6. In our opinion, and to the best of our information and according to the explanations

given to us, the financial statements give the information required by the Act in the

manner so required and give a true and fair view in conformity with the accounting

principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the company as at 31st

March, 2014; and

(b) in the case of Statement of Profit and Loss, of the Profit for the year ended on that

date.

Report on Other Legal and Regulatory Requirements:

7. As required by section 227(3) of the Act, we report that:

a. We have obtained all the information and explanations which to the best of our

knowledge and belief were necessary for the purpose of the audit.

b. In our opinion, proper books of account as required by law have been kept by the

company so far as appears from our examination of those books.

c. The Balance Sheet and Statement of Profit and Loss dealt with by this report are in

agreement with the books of account;

d. In our opinion, the Balance Sheet and Statement of Profit and Loss comply with

the Accounting Standards referred to in sub section (3C) of section 211 of the Com-

panies Act, 1956; 28

e. On the basis of written representations received from the directors as on 31st

March, 2013 and taken on record by the Board of Directors, none of the directors is

disqualified as on 31st March, 2014 from being appointed as a director in terms of

clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

f. Since the Central Government has not issued any notification as to the rate at which

the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued

any Rules under the said section, prescribing the manner in which such cess is to be

paid, no cess is due and payable by the Company.

"

" For XXX

CHARTERED ACCOUNTANTS

"Place : Mumbai MR. A

Date : 31/08/2014 (Proprietor)

Membership No. 132564

29

""

CONCLUSION

"The project concluded that, given the complexity and development of Compa-

ny, the overall level of compliances with the standards and codes is of high order.

This project gives the correct ideas about how the major areas can be found by way of

effective auditing system i.e. errors, frauds, manipulations etc. form this auditor get

the clear idea show to recommend on the position. Project also contain that how to

conduct of audit of the company, what are the various procedure through which audit

of company should be done. Form auditing point of view, there is proper follow up of

work done in every organization there no misconduct of transactions is taken places

for that purpose the auditing is very important aspect in todays scenario form com-

pany and point of view.

"

30

"Bibliography

TYBCom Accountancy Auditing-II

Advanced Auditing Mcom Part-II

www.moneycontrol.com

www.profit.ndtv.com

www.icao.int

http://www.tajhotels.com/Investor-Relations/annual-reports.html

""

31