1) Most important point is the existence of Very nature of Limited liability concept, which exposed the creditor with unlimited risk who are highly remain unsecured, that includes Govt also.
So, it gives the unlevered power to Promoters to expose the business to high risk and leave the liability of the company unsettled and yet go scout free with the limited liability concept.
Existence of Auditors will help in disclosure of the fact in proper manner which may affect the stakeholders and enhance their risk.
2) Exposing Company to draw their Financial Statements on their own or through unqualified personnel and then unverified also expose them for clerical mistake, improper presentation, Incompleteness of Accounts, Non Booking of Liabilities. Reliance on these statements by Govt or Investors will be in high risk category and No one would want to take a risk on this and rely on statement which are subject to flaws.
3) Auditor had to check Fundamental Accounting Assumption like Going concern and consistency and Disclose them if Company fails to comply them so that necessary steps may be taken by Stakeholders. So is there a circumstance which Point towards closure of Company in near future , can’t be highlighted and Creditors, Investors dealing with them would expose themselves to great risk.
4) There are millions of Companies which fall under MSMC category and Govt use the data through their financials to plan and report. With data being prepared by unqualified Accountant and Unverified, Will there not be significant drop in the quality of data ? It will directly impact the data being used by Govt for planning, analysis and action
5) By doing so we are challenging the intellectual conscience of our Predecessors who after lot of deliberation has justified the need of Audit. Years these audits were applicable and just because of small reasons NFRA proposed to remove the audit is a disastrous step which would certainly impact the economy in which MSMCs has the large role to play.
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