Sunday, 6 November 2011

On which grounds the auditor can present the qualified report explain the reasons or Explain the features of qualified report

Following are the important reasons of presenting the qualified report :

1. Proper Books Not Available :-
If proper books of accounts have not been kept by the business concern, it induces the auditor to mention this fact in the report. Because according the law these books should be maintained.

2. No Access To Record :-
If it is refused to show the books and record to the auditor then he is unable to collect the informations for the audit purpose. So the auditor will present the qualified report.

3. Changes In Policies :-
There should be no change in the accounting policies from year to year. For example, the change in depreciation rate and change in provision of bad debts can distort the financial statement. The auditor can mention these changes.

4. Wrong Payment :-
If expenses incurred other than business objective these are wrong payments. These can be mentioned by the auditor in the report.

5. Misuse Of Powers :-
If management misuses the powers of doing the business and do not follow the law, then auditor present qualified report. For example, if the payment of dividend is made out of capital.

6. Figures Do Not Match :-
If financial statement figures do not tally with figures of journal and ledger, it is objectionable the auditor can present qualified report.

7. Against Memorandum :-
If investment do not meet the requirement of the company's Memorandum of Articles then it can be informed by the auditor to the shareholders.

8. Incomplete Information :-
If auditor fails to obtain the full information, he can present the facts to the owners.

9. Informal Statements :-
The format is provided for the financial statement by the law. If companies do not prepare the statements according to schedule, the auditor can mention it in the report.

10. Poor Control System :-
The auditor can check the internal control system. If auditor feels that this system is very poor and creates hurdles to verify various items, he may submit qualified report.

11. Provision Of Bad Debts :-
If the provision made for bad debts is not sufficient, auditor can mention it in his report. On other side if the amount set a side for meeting bad debts is insufficient even then he can present qualified report.

12. Court Disputes :-
In case of court and tax disputes auditor has right to report the matters to the shareholders. Because these have greater effect on the financial statement of the company.

13. Stock In Trade :-
If stock in trade has been valued at market price which is excess of cost price, it can be mentioned by the auditor in the report.

14. Investment :-
If the investment has been valued at cost price which is excess of market price, it can become the cause of qualified report.


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