# Auditor's Report — What It Must Contain
## The Core Function (Section 143(2))
The auditor must examine the accounts and financial statements that are required to be laid before the company in general meeting, and express an opinion to the members on whether they give a true and fair view of:
- State of affairs at end of FY (Balance Sheet)
- Profit & Loss for the year
- Cash Flow position
- Other prescribed matters
## Crucial Scope Limit
The auditor audits the Financial Statements only. He does not audit:
- The Board's Report
- Management Discussion & Analysis (MD&A)
This distinction is frequently tested.
## Mandatory Contents of the Audit Report (Section 143(3))
The report must specifically state:
1. Whether he obtained all information & explanations needed for audit (if not, the details and effect).
2. Whether proper books of account are kept and proper returns received from branches not visited.
3. Whether branch audit report (by another auditor) has been received and how he dealt with it.
4. Whether Balance Sheet & P&L are in agreement with books of account and returns.
5. Whether FS comply with Accounting Standards.
6. Any qualification, reservation or adverse remark on accounts and other matters.
7. Observations on financial transactions having adverse effect on functioning of company.
8. Whether any director is disqualified u/s 164(2).
9. Whether company has adequate Internal Financial Controls (IFC) with operating effectiveness — but this is NOT applicable to:
- Private company with turnover < ₹50 crores AND borrowings (from banks/FIs/body corporate) < ₹25 crores at any time during FY (provided no default u/s 92 & 137), OR
- One Person Company, OR
- Small Company.
10. Other prescribed matters.
Rule of negative answer: If any of the above is answered in the negative or with qualification, the report must give reasons.
## Additional Compliance Requirements
- CARO 2020 — to be complied by statutory auditor of every company on which it applies.
- All auditors must comply with Auditing Standards (issued by ICAI and notified by CG in consultation with NFRA).
## Signing of the Audit Report — Section 145
- The auditor shall sign the audit report or sign/certify other documents.
- In case of a firm/LLP: only a partner who is a Chartered Accountant is authorized to sign on behalf of the firm.
- Reading at AGM: qualifications, observations or comments having adverse effect on functioning must be read at the general meeting and be open to inspection by any member.