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Unit 14: Audit of a Partnership Accounts and Government Company

or divisions, who are responsible for key decisions or judgments on significant matters with Notes
respect to the audit of the financial statements on which the firm will express an opinion.” The
term is used not only in the provision on partner rotation, but also with respect to employment
relationships and compensation, where it is concluded that such provisions should apply to
additional audit partners. The definition of key audit partner focuses on whether a partner is
responsible for key decisions or judgments on significant matters with respect to the audit of the
financial statements on which the firm will express an opinion.

Example: In the case of an audit of consolidated financial statements, if the audit partner
of a significant subsidiary is responsible for key decisions or judgments on significant matters
with respect to the consolidated financial statements, that individual would be considered to be
a key audit partner.

14.1.4 Audit Procedure

1. Partnership deed: Auditor must study the partnership deed before starting the audit. The
clauses containing the working of the firm should be carefully studied.
2. Explanations: If the partnership deed is silent about any important matter, it should be
clarified with the partners of the firm.

3. Powers and duties of partners: Auditor should inquire about the powers and duties of the
partners. It should be checked that they work within their powers.
4. Division of work: Division of work among the partners should be studied carefully. It
should be checked that the partners work for the allotted work to them.
5. Study the financial clauses: Auditor should carefully study the clauses of the deed regarding
the salary of partners, interest on the capital, and interest on drawings.

6. Checking of the books of account: After studying the special points in the partnership
deed, auditor can start checking the books of account as in any other routine audit.
7. Report of the audit: Auditor should submit the report to the partners of the firm.

14.2 Audit of Government Companies

Section 617 of the companies act defines a Government company as a company in which not less
than fifty-one per cent of the paid up share capital is held by the Central Government, or by any
State Government, or Governments, or partly by the Central Government and partly by one or
more State Government. It also includes a company which is a subsidiary of a Government
company.
Certain special provisions have been laid down in the Act regarding a Government company.
They are discussed below:

The auditor of a Government Company shall be appointed or reappointed by the Central
Government on the advice of the Comptroller and Auditor General of India. The Comptroller
and Auditor General of India will have the power to direct the manner in which the company’s
accounts shall be audited by the auditor. He shall also have the power to conduct a supplementary
or test audit of the company’s accounts by such person or persons as he may authorize in this
behalf.
The auditor will submit a copy of the audit report to the Comptroller and Auditor General of
India who may comment upon or supplement the audit report in such manner as he may think

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