20.2.02 Clarification Regarding Section 230 & Auditors Report To the Members

Enquiry:

Section 230 of the Companies Ordinance 1984 deals with “Books of Account” and has several subsections. The sub-section 6 states:

Quote “The books of account of every company relating to a period of not less than ten years immediately preceding the current year shall be preserved in good order” unquote.

And whereas

– the Auditor’s Report to the members states:

Quote “We report that:

a} In our opinion, proper books of account have been kept by the Company as required by the Companies Ordinance 1984” Unquote

Similarly under para 3, line 3 states:

Quote “An Audit includes examining on a test basis” Unquote

I request clarification whether the Auditor’s Report to the members confirms compliance of Section 230 including subsection 6 having been verified on test check basis by the external auditors or not?

Opinion:

The Committee would like to emphasis that both the above addressed matters are different. Section 230 of the Companies Ordinance 1984 deals with retention of records whereas auditor’s report addresses maintenance of proper books of account which means proper accounting, properly reconciled, etc.

The Committee would like to reproduce section 255(3) of the Companies Ordinance 1984:

(3) The auditor shall make a report to the members of the company on the accounts and books of accounts of the company and on every balance-sheet and profit and loss account or income and expenditure account and on every other document forming part of the balance-sheet and profit and loss account or income and expenditure account, including notes, statements or schedules appended thereto, which are laid before the company in general meeting during his tenure of office, and the report shall state-

(a)……

(b) whether or not in their opinion proper books of accounts as required by this Ordinance have been kept by the company;

An auditor is required to give an opinion that proper books of accounts have been maintained by the company for the relevant accounting period. An auditor is not required to perform extra procedures to verify whether or not books of account of last ten years have been preserved by the company.

(February 11, 2015)