As part of measures to strengthen overall corporate governance standards in the country, the Corporate Affairs Ministry has come out with elaborate directions for auditors to follow while auditing companies.
The order comes amid enhanced efforts by the government as well as regulators to prevent instances of financial and accounting frauds.
As per the elaborate directions, auditors would have to mention in detail various aspects about the functioning and management of a company in their audit reports.
In the order, dated April 10, the Ministry said an auditor should mention whether there is "an adequate internal control system commensurate with the size of the company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services".
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With regard to outstanding statutory dues, the Ministry said auditors have to mention about the same in their reports. This would be applicable on dues related to provident fund, employees' state insurance, income, sales, wealth and service taxes, customs and excise duties, among others.
Tax disputes should also be mentioned by the auditors.
Besides, the auditor is required to report whether a firm is maintaining proper records, including quantitative details and situation of fixed assets.
The auditor has to mention whether the company's management physically verifies fixed assets at reasonable intervals and about any material discrepancies. Also, it has to be mentioned whether lapses have been properly dealt with in the books of account.
Auditors are now required to report "any fraud on or by the company" along with its nature and amount involved. The latest directions would be applicable from the financial year starting on or after April 1, 2014.