Dear @ashwinidamani
Sure. On point 2 of remuneration, I think honest promoters may take a high salary and avoid other means of taking fund out of the business – like over invoicing vendors and taking a cash back. So it may also be a plus. I have also seen them reduce their own payout if the business does poorly.
On point 1, if the firm is listed, given the onerous levels of compliance having an unknown audited firm will be suspicious. I use Prime Academy’s research on auditors to find out more about the auditors’ credibility. I know of a large listed entity in Pune which has smaller listed entities. The auditors of the two are different and the smaller entity has an auditor whose credentials in my view are suspect. He could not provide me clarifications on certain items in revenue recognition and my queries on RPTs.
Of course we need to note that an unknown audited firm does not mean ‘dis reputed’. For instance when I was looking at a small firm and called the auditor in Coimbatore, he was extremely clear on how he treated certain transaction, and seemed to have his own ‘independent’ mind.
Ultimately an ‘independent’ auditor’s report should pass the test of independence!
Warm regards,
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