Para 2.5.10 — MSO (Audit)
Original Rule Text
2.5.10 The fundamental objectives of audit of accounts of companies/corporations are to ascertain whether the Financial Statements:
(i) present a true and fair view of the entity’s financial position;
(ii) are prepared in accordance with the Accounting Standards and laws, if any, governing the entities;
(iii) are presented with due consideration to the circumstances of the audited entity;
(iv) contain sufficient disclosures about their various elements, including any unusual items; and
(v) various elements thereof are properly evaluated, measured and presented.
What This Means
When auditing the accounts of government companies and corporations, the fundamental goal is to check whether the financial statements present a true and fair picture of the entity's financial position. Auditors verify that statements comply with applicable accounting standards and laws, are prepared with due consideration to the entity's specific circumstances, contain sufficient disclosures including any unusual items, and that all financial elements are properly evaluated and presented.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Financial statements must present a true and fair view of the entity's financial position
- 2Compliance with accounting standards and applicable laws must be verified
- 3Statements must be prepared considering the specific circumstances of the audited entity
- 4Sufficient disclosures about all elements, including unusual items, are required
- 5All financial elements must be properly evaluated, measured, and presented
Practical Example
While auditing a state transport corporation, the audit team finds that the corporation has not disclosed a pending litigation worth Rs 50 crore in its financial statements, and has valued its old bus fleet at original purchase price without applying depreciation as per Accounting Standard 6. The auditors flag both the inadequate disclosure and the incorrect valuation in their report.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
What does 'true and fair view' mean in the context of financial statements?▼
Why are disclosures about unusual items important?▼
Which accounting standards apply to government companies?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.