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CA RAGHAV AGARWAL
Clause 49 of the Listing Agreement in India pertains to the corporate governance requirements for listed companies. It lays down the guidelines that companies listed on Indian stock exchanges must adhere to in order to ensure transparency, accountability and good corporate governance practices. Under Clause 49, a listed company is required to submit its quarterly financial results to the stock exchange within 45 days from the end of the quarter. Along with these results, the company is also required to submit a limited review report by a qualified auditor.
A limited review of financial statements is a review engagement conducted by a chartered accountant (CA) to provide limited assurance on the financial statements of a company. The purpose of a limited review is to enable the CA to express a limited assurance conclusion on whether the financial statements are free from material misstatement. This is done through inquiry, analytical procedures and discussion with management. Unlike a full-fledged audit, a limited review does not provide a high level of assurance, as the CA does not perform extensive testing of internal controls and other procedures. A limited review is typically carried out for quarterly or half-yearly financial statements, rather than annual statements, and it is often used by companies to comply with regulatory requirements or to provide stakeholders with a measure of comfort that the financial statements are reliable.
With the multitude of challenges being faced by all, corporate reporting becomes even more complex, particularly in areas where judgments are exercised and estimates made. The term “Limited Review” is one of the major keys to establish judgement and estimates on the assertions of financial statements. As per clause 41 of the Listing Agreement, every listed company and all entities whose accounts are to be consolidated with the listed company is required to get limited review done through statutory auditors and furnish the unaudited quarterly result to the concerned stock exchange within 45 days of the end of respective quarter.
The chartered accountant issues a report on the limited review, which contains their findings and conclusions. The report is addressed to the company’s board of directors or management, and it is not intended to be a public document.
The limited review report is required to be prepared in accordance with the standards on review engagements issued by the Institute of Chartered Accountants of India (ICAI). The report must also contain certain specified disclosures, such as a statement on the responsibility of the company’s management for the financial statements, a statement on the auditor’s independence, and a statement on the scope of the limited review.
How Can MNRS Help?
Under limited review engagement, we perform analytical procedures and makes inquiries to obtain a reasonable basis for expressing limited assurance on the financial statements. We can help listed and other companies in getting limited review done in strict compliance with applicable statutes and submit our report in a time bound manner. Our team of highly skilled professionals maintain our client’s integrity and confidentiality, provides a thorough analysis of applicable accounting standards, assist them in achieving a high level of integrity and accuracy. Our skilled professional auditors adopt a risk-based approach during our limited review engagement and help our clients by undertaking following activities: –
- We undertake comprehensive study of our client’s business and industry of the company being reviewed to identify any significant risks that may impact the financial statements.
- We categorically review accounting policies and procedures being followed by the company being reviewed to obtain an understanding of the company’s accounting policies and procedures and assess whether they are consistent with applicable accounting standards.
- We perform analytical procedures to identify any unusual or unexpected changes in the financial statements, such as significant fluctuations in revenue, expenses or key ratios.
- We conduct thorough inquiries and discussions with the management to understand any significant changes in the company’s operations, accounting policies or procedures, or other matters that may impact the financial statements.
- During our engagement, we assess the control environment of the company to identify any deficiencies that may impact the reliability of financial statements and which may result in regulatory action and harm affairs of the company in any way.
- Based on our findings of the limited review, we prepare a draft report expressing a limited assurance conclusion on whether the financial statements are free from material misstatement and discuss it with management before issuing final report after considering their explanations and submissions.
- We issue final report in strict compliance with applicable regulations.