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1

CA GOPAL KRISHNA RAJU | FCA AICWA ACS PGDOR PGDFM D ISA (ICA) MPhil

Tax Partner Ms K Gopal Rao amp Co Chartered Accountants Chennai

Member ndash Southern India Regional Council of The Institute of Chartered Accountants of India

The Companies Act 2013Accounts Audit amp Auditors

Thursday 29th MAY 2014983115983151983156983156983157983154983152983157983154983137983149983085983105983140983161983137983154 983107983120983109 983123983156983157983140983161 983107983145983154983139983148983141

The Companies Act 2013

1866 1882 1913 1956 2013

470 sections 95 definitions XXIX

Chapters VII Schedules

Willingness to listen patience to

understand strength to support

Letrsquos say yes to 3As ndash Accept Adjust and

Appreciate

Letrsquos say no to 3Cs ndash Criticize Condemn

and complain

Concept of De-conditioning

Applicability Date 1st APRIL 2014

Sections

Rules (more than 4 times the act)

Forms ndash 117 (44 + 73)

E-forms and physical forms

Old Act vs New Act comparison study

New Act ndash Fresh Study

Applicability of Audit report (SA 700 705 amp 706) and CARO for FY2013-2014 on ly

For FY 2014-2015

Guidance Note on Companies Act 2013 ndash CLampCGC

New Audit Report Format - AASB

Registered Companies as on 31st March 2014

The total number of companies registered in the country as on

31st March 2014 stood at 1394819

Of them 270915 companies were closed 142373

companies were lying dormant 5090 companies were under

liquidation 23696 companies were in the process of being

struck-off and 312 companies were in the process of being re-

activated

Taking the above into account there were 952433 active

companies as on 31st March 2014

Part IX A ndash Companies Act 1956 Chapter I to XII ndash Producer

Companies

Section 581A ndash 581ZT

Shall be applicable mutatis mutandis to a producer company in a

manner as if the companies act 1956 has not been repealed until a

special act is enacted for producer companies

Until a date is notified us 434 for NCLT All CLB and CL court shall

continue to apply as if the CA 1956 has not been repealed

465 Repeal of certain enactments and savings Chapter IX ndash Accounts of Companies

Section Particulars ndash 11 sections (8 Notified with rules)

128 Books of Account etc to be kept by company

129 Financial Statement

130 Re-opening of accounts on courtrsquos or tribunalrsquos orders

131 Voluntary revision of financial statements or Boardrsquos Report

132 Constitution of National Financial Reporting Authority

133 Central Government to prescribe accounting standards

134 Financial statement Boardrsquos Report etc

135 Corporate Social Responsibility (Separate Rules notified)

136 Right of member to copies of audited financial statement

137 Copy of financial statement to be filed with registrar

138 Internal Audit

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2

The Companies (Accounts) Rules 2014Rules Particulars ndash 13 Rules

1 Short title and commencement

2 Definitions

3 Manner of Books of Accounts to be kept in electronic form

4 Conditions regarding maintenance amp inspection of certain financial information by directors

5 Form of statement containing the salient features of financial statements of subsidiaries

6 Manner of Consolidation of accounts

7 Transitional provisions with respect t o accounting standards

8 Matters to be included in Boardrsquos Report

9 Disclosure about CSR Policy

10 Statement containing salient features of financial statements

11 Manner of circulation of financial statements in certain cases

12 Filing of financial statements and fees to be paid thereon

13 Companies required to appoint Internal Auditor

The Companies (Accounts) Rules 2014

Rules Particulars ndash 13 Rules Form

1 Short title and commencement -

2 Definitions -

3 Manner of Books of Accounts to be kept in electronic form -

4 Conditions regarding maintenance amp inspection of certain financial information by directors -

5 Form of statement containing the salient features of financial statements of subsidiaries AOC-1

6 Manner of Consolidation of accounts -

7 Transitional provisions with respect to accounting st andards -

8 Matters to be included in Boardrsquos Report AOC-2

9 Disclosure about CSR Policy -

10 Statement containing salient features of financial st atements AOC-3

11 Manner of circulation of financial statements in certain cases -

12 Filing of financial statements and fees to be paid thereon AOC-4

13 Companies required to appoint Internal Auditor -

Chapter X ndash Audit amp Auditors

Section Particulars ndash 10 sections notified with rules

139 Appointment of auditors

140 Removal resignation of auditor and giving of special notice

141 Eligibility qualifications and disqualifications of auditors

142 Remuneration of auditors

143 Powers and duties of auditors and auditing standards

144 Auditors not to render certain services

145 Auditors to sign audit reports etc

146 Auditors to attend general meeting

147 Punishment for contravention

148 CG to specify audit of items of cost in respect of certain companies

The Companies (Audit and Auditors) Rules 2014

Rule Particulars ndash 14 Rules

1 Short title and commencement

2 Definitions

3 Manner and procedure of selection and appointment of auditors

4 Conditions for appointment and notice to Registrar

5 Class of Companies

6 Manner of rotation of auditors by the companies on expiry of their term

7 Removal of the auditor before expiry of his term

8 Resignation of auditor

9 Liability to devolve on concerned partners only

10 Disqualifications of auditor

11 Other matters to be included in auditors report

12 Duties amp powers of the companyrsquos auditor with reference to the audit of the branch amp the branch auditor

13 Reporting of Frauds by Auditor

14 Remuneration of the Cost Auditor

The Companies (Audit and Auditors) Rules 2014

Rule Particulars ndash 14 Rules ndash 4 Forms Forms

1 Short title and commencement -

2 Definitions -

3 Manner and procedure of selection and appointment of auditors -

4 Conditions for appointment and notice to Registrar ADT-1

5 Class of Companies -

6 Manner of rotation of auditors by the companies on expiry of their term -

7 Removal of the auditor before expiry of his term ADT-2

8 Resignation of auditor ADT-3

9 Liability to devolve on concerned partners only -

10 Disqualifications of auditor -

11 Other matters to be included in auditors report -

12 Duties amp powers of the companyrsquos auditor with reference to the audit of the branch amp the branch

auditor

-

13 Reporting of Frauds by Auditor ADT-4

14 Remuneration of the Cost Auditor -

bull Useful lives to compute depreciation

bull Silent Revolution is Depreciation

bull From rates-provided regime To useful-life regime ndashPrescribed

bull Method of depreciation ndash Choice

bull Significant table work (increased reduced)

bull Useful Life ndash Age = Remaining life

bull Revised GN on Transition accounting on depreciation

bull Residual Value

7212019 Companies act Audit and accountspdf

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3

Schedule II - Depreciation

Part A

bull Depreciation = Cost ndash Residual Value

bull Useful Lives = Available for use

bull Depreciation includes amortization

bull Useful life in part C is maximum

bull Can we have useful life less than Part C

bull 15 parts

bull For intangible assets = provision of AS-26 is applicable forthe time being in force except PPP projects

Schedule IISchedule IISchedule IISchedule II ndash ndashndash ndash Part BPart BPart BPart B

Part Bbull The useful life or residual life of any specific asset as

notified for accounting purposes by a regulatory authorityshall be applied

bull NESD ndash No extra shift depreciation

bull Life is less than schedule II ndash Disclose

bull Methods of depreciation ndash Disclose

bull Methods ndash Silent SLM WDV Annuity Sum of theyears digits Units of production

bull Max Life ndash 60 years (building other than factory buildingwith RCC frame)

Componentizationhellip

Part Bhellip

bull Min Life ndash 3 years ndash End user devices viz desktops laptops pads

amp temporary structures

bull Componentization of assets Note 4 to Schedule

bull Useful life is for whole of the asset where cost of a part of the

asset is significant to total cost of the asset and useful life of that

part is different from the useful life then separate UL is

applicable for that part

Schedule II - UL

Part Chellip snippets

bull Plant amp Machinery ndash General (CPP ndash 25 years Others ndash 15

years)

bull PampM ndash Special

bull Motor Vehicles ndash 10 years

bull Hire Vehicles ndash 6 years

SCHEME OF THE ACT

470Sections

29 Chapters7 Schedules

A very substantial part of the Act is in the form of ruleswhich are being prescribed separately

658Sections

13 Parts15Schedules

1 Accounting Standards

2 Associate Company

3 Auditing Standards

4 Authorised Capital

5 Books of Accounts

6 Called up capital

7 Charge

8 Chartered Accountant

9 Chief Executive Officer

10 Chief Financial Officer

11 Company Limited By Guarantee

12 Company Limited by Shares

13 Company Liquidator

14 Contributory

15 Control

16 Cost Accountant

17 Deposit

18 Expert

19 Financial Institution

20 Financial Statement

21 Foreign Company

22 Free Reserves

23 Global Depository Receipts

24 Independent Director

25 Indian Depository Receipt

26 Interested Director

27 Issued Capital

28 Key Managerial Personnel

29 Notification

30 Official Liquidator

31 One Person Company

32 Ordinary or Special Resolution

33 Postal Ballot

34 Promoter

35 Public Financial Institution

36 Register of Companies

37 Related Party

38 Remuneration

39 Serious Fraud InvestigationOffice

40 Small Company

41 Subscribed capital

42 Sweat Equity Shares

43 Turnover

44 Unlimited Company

45 Voting Right

46 Whole Time Director

983118983141983159 983108983141983142983145983150983145983156983145983151983150983155 983145983150983156983154983151983140983157983139983141983140 983145983150 983123983141983139983156983145983151983150 983090983098983085

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4

bull 2(18) ldquoChief Executive Officerrdquo means an officer of a company who

has been designated as such by it

bull 2(19) ldquoChief Financial Officerrdquo means a person appointed as a Chief

Financial Officer of a company

bull 2(66) ldquoprescribedrdquo means prescribed by rules made under this Act

983108983109983110983113983118983113983124983113983119983118983123 983127983112983113983107983112 983112983105983126983109 983106983109983109983118 983108983113983123983107983119983118983124983113983118983125983109983108

District Court

Industrial Company

Industrial Undertaking

Information memorandum

Issued generally

State Level Institution

Option in Securities

Operating Agency

Public Holiday

Share with Differential Rights

Sick Industrial Company

983108983109983110983113983118983113983124983113983119983118983123 983127983112983113983107983112 983112983105983126983109 983106983109983109983118 983108983113983123983107983119983118983124983113983118983125983109983108

District Court

Industrial Company

Industrial Undertaking

Information memorandum

Issued generally

State Level Institution

Option in Securities

Operating Agency

Public Holiday

Share with Differential Rights

Sick Industrial Company

ldquofinancial statementrdquo in relation to a company includesmdash

i a balance sheet as at the end of the financial year

ii a profit and loss account or in the case of a company carrying on any activity not

for profit an income and expenditure account for the financial year

iii cash flow statement for the financial year

iv a statement of changes in equity if applicable and

v any explanatory note annexed to or forming part of any document referred to in

sub-clause (i) to sub-clause (iv)

One Person Company Small Company Dormant Company ndash may not include Cash

Flow Statement

Financial Statement ndash 2(40)

Meaning ldquoFinancial yearrdquo in relation to any company or body corporate

means the period ending on the 31st day of March every year

Breathing time within a period of two years from such

commencement align its financial year as per the provisions of this

clause

Exception Incorporated on or after 1st January of a year then the period

ending on the 31st day of March if the following year

Financial Year ndash 2(41)

Relative ndash 2(77)

lsquolsquorelativersquorsquo with reference to any person means any one who is related

to another if mdash

i they are members of a Hindu Undivided Family

ii they are husband and wife or

iii one person is related to the other in such manner as may

be prescribed

List of Relatives as prescribed ndash only 8 only 8 only 8 only 8bull The Companies (Specification of definitions details) Rules 2014

bull Rule 4

bull A person shall be deemed to be the relative of another if he or she is related to another in the

following manner namely-

1 983110983137983156983144983141983154 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983110983137983156983144983141983154)

983090 983117983151983156983144983141983154 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983117983151983156983144983141983154)

983091 983123983151983150 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983123983151983150)

983092 983123983151983150991257983155 983127983145983142983141

983093 983108983137983157983143983144983156983141983154

983094 983108983137983157983143983144983156983141983154991257983155 983112983157983155983138983137983150983140

983095 983106983154983151983156983144983141983154 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983106983154983151983156983144983141983154)

983096 983123983145983155983156983141983154 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983123983145983155983156983141983154)

What happened to Step-Daughter Is she not a relative

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5

Expert - Section 2(38)

bull Definition - ldquoexpertrdquo includes an engineer a valuer a

chartered accountant a company secretary a cost accountant

and any other person who has the power or authority to issue a

certificate in pursuance of any law for the time being in force

Professional Indemnity Insurance ndash need of the hour

bull 247(4) ndash Serious liabilitybull refund the remuneration received by him to the company and

bull pay for damages to the company or to any other person for lossarising out of incorrect or misleading statements of particulars made

in his report

All companies having subsidiary(s) need to prepare consolidated

accounts

ldquoSubsidiaryrdquo includes associate and joint ventures

Rule 5 amp 6 ndash The Companies (Accounts) Rules 2014

Form AOC-1 The Statement containing salient features of the

FS of subsidiaries associate companies Joint ventures

Consolidation of Accounts 129(3)Consolidation of Accounts 129(3)Consolidation of Accounts 129(3)Consolidation of Accounts 129(3)

1956 Position

Consolidated is not mandated for any company

Only listing agreement requires consolidation for listed companies

having subsidiaries (clause 32 of Listing agreement and AS 21)

Chapter IX ndash Accounts of Companies

Section Particulars

128 Books of Account etc to be kept by company

129 Financial Statement

130 Re-opening of accounts on courtrsquos or tribunalrsquos orders

131 Voluntary revision of financial statements or Boardrsquos Report

132 Constitution of National Financial Reporting Authority

133 Central Government to prescribe accounting standards

134 Financial statement Boardrsquos Report etc

135 Corporate Social Responsibility

136 Right of member to copies of audited financial statement

137 Copy of financial statement to be filed with registrar

138 Internal Audit

ldquobook and paperrdquoand ldquobook or paperrdquo include

Books of account

Deeds

Vouchers

Writings

Documents

Minutes and registers maintained on paper or in electronic form

book and paper and book or paper- 2(12)

ldquobooks of accountrdquo includes records maintained in respect of mdash

1 a ll sums of money received and expended by a company and matters inrelation to which the receipts and expenditure take place

2 all sales and purchases of goods and services by the company

3 the assets and liabilities of the company and

4 the items of cost as may be prescribed under section 148 in the case of acompany which belongs to any class of companies specified under that

section

Refer us 209(1) of The Companies Act 1956

Books of Account - 2(13)

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6

Transitional provisions with respect to

Accounting Standards

bull The Companies (Accounts) Rules 2014

bull Rule 7

bull ICAI ndash AS continues as on date Standards as specified under companies

act 1956 shall be deemed to be the accounting standards until accounting

standards are specified by central government us 133

bull NACAS as of now NFRA later Till NFRA is constituted us 132 the central

government may prescribe the accounting standard or any addendum as

recommended by ICAI in consultation with and after examination of

recommendations made by NACAS constituted us 210A of companies Act

1956

NACAS National Advisory Committee on Accounting Standards

E-Mode ndash Rule 3

bull The Companies (Accounts) Rules 2014

bull Books of Accounts ndash Accessible (in India) Complete unaltered

bull C I A ndash Principles of Information Security but C is missing ndash only IampA is

addressed in rule

bull Rule 3(6) The company shall intimate to the registrar on an annual

basis at the time of filing of financial statement

a Name of the service provider

b The internet protocol address of service provider

c The location of the service provider (wherever applicable)

d Where the books of account and other books and papers are maintained on cloud

such address (physical) as provided by the service provider

E-Mode

bull Financial Statements ndash Section 136 ndash (Right of members to copies of audited

financial statements)

bull 21 days Notice to be sent

bull Along with a copy of the financial statements including consolidated

financial statements if any auditorrsquos report and every other documentrequired by law to be annexed or attached to the financial statements

bull To be Hosted in Website ndash Listed Company (as per Act)

E-Mode

bull The Companies (Accounts) Rules 2014

bull Rule 11 May be sent in e-mode ndash

bull All listed companies and all public companies having Net-worth gt 1 Cr amp

Turnover gt 10 Cr ndash the financial statements may be sent ndash

a By electronic mode to such members whose shareholding is in de-mat form and

whose email ids are registered with depository for communication purposes

b Where shareholding is held otherwise than by dematerialized format to such

members who have positively consented in writing for receiving by electronic mode

and

c By dispatch of physical copies through any recognized mode of delivery as specified

us 20

Boardrsquos Report shall also contain

bull The Companies (Accounts) Rules 2014

bull Rule 8 (5) Boardrsquos Report shall also contain

i the financial summary or highlights

ii the change in the nature of business if any

i ii th e details of directors or key managerial personnel who were appointed or have

resigned during the year

iv the names of companies which have become or ceased to be its Subsidiaries joint

ventures or associate companies during the year

bull The Companies (Accounts) Rules 2014

bull Rule 8 (5) Boardrsquos Report shall also contain

(v) the details relating to deposits covered under Chapter V of the Act-

(a) accepted during the year

(b) remained unpaid or unclaimed as at the end of the year

(c) whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so

number of such cases an d the total amount involved-

ndash (i) at the beginning of the year

ndash (ii) maximum during the year

ndash (iii) at the end of the year

(vi) the details of deposits which are not in compliance with the requirements of Chapter V of

the Act

(vii) the details of significant and material orders passed by the r egulators or courts or tribunals

impacting the going concern status and companyrsquos operations in future

(viii) the details in respect of adequacy of internal financial controls with reference to the

Financial Statements

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7

All companies including private companies who are meeting

eligibility criteria (NW ge 500 cr Turnover ge 1000 cr NP ge 5 cr)

are required to constitute a CSR committee consisting of at

least 3 directors out of which 1 must be ID and spend at least

2 of average NP on CSR activities

Corporate Social Responsibility 135Corporate Social Responsibility 135Corporate Social Responsibility 135Corporate Social Responsibility 135

1956 Position

No requirement to spend on CSR activties

CSR ndash Sec 135 amp CSR Rules

bull Net Profit ndash PBT

bull Tax treatment of CSR in accordance with proposed notification (beingstatutory expenditure ndash should be tax deductible) -

bull Professional Opportunity ndash Company Setup Trust Section 8 company Society

bull Other Trusts ndash minimum 3 year track record ndash CEO of IICA ndash DirectorGeneral Mr Bhaskar Chatterjee ndash Accreditation to NGOs ndash Govt Ratingfor NPOs ndash Partnering with ldquo Tata institute of social sciencesrdquo

bull CSR Index ndash BSE amp IICA ndash To Develop

bull Min 8000 eligible companies

bull Min Rs 12000 crores pay-off

138 - Internal Audit

bull Welcome move ndash Professional opportunity ndash Mandatory IA for listed amp Public

companies

bull CA CMA Board nominated professional

bull Rule is silent ndash Board AC to formulate - Scope Functioning periodicity

amp methodology in consultation with IA

bull Internal Auditor may or may not be

an employee of the company

bull CA means a CA whether engaged in

practice or not

Rule 13

The Companies (Accounts) Rules 2014 (all limits in preceding FY)

983110983151983148983148983151983159983145983150983143 983139983151983149983152983137983150983145983141983155 983156983151 983137983152983152983151983145983150983156 983113983150983156983141983154983150983137983148 983105983157983140983145983156983151983154 983149983137983150983140983137983156983151983154983145983148983161

983159983145983156983144983145983150 983094 983149983151983150983156983144983155 983151983142 983139983151983149983149983141983150983139983141983149983141983150983156 983151983142 983155983141983139983156983145983151983150

o Listed company

o Unlisted public company

bull Paid-up capital ge 50 crores

bull Turnover ge 200 crores

bull Os Loans or borrowings ge 100 crores

bull Os Deposits ge 25 crores

o Private Company

bull Turnover ge 200 crores

bull Os Loans or borrowings ge 100 crores (from banks or PFIs)

Rule 13(1) To appoint an internal auditor or a firm of internal auditors

NFRA

National Financial Reporting Authority

bull To be constituted by a notification of the Central Government

bull It shall consist of a Chairman (to be appointed by CG) and other members not

exceeding 15 in number

bull Chairperson and members shall make a declaration to the Central Government

regarding no conflict of interest or lack of independence in respect of his or

their appointment

bull Chairperson and members who are in full-time employment with NFRA 983155983144983137983148983148 983150983151983156

983138983141 983137983155983155983151983139983145983137983156983141983140 983159983145983156983144 983137983150983161 983137983157983140983145983156 983142983145983154983149 (including related consultancy firms) during the

course of their appointment and two years after ceasing to hold such

appointment

Constitution of NFRA

bull Yet to constitute by notification ndash Still in Draft Rules stage

bull Role of NFRA 132(2)

1 make recommendations to the Central Government on the formulation and laying

down of accounting and auditing policies and standards for adoption by

companies or class of companies or their auditors as the case may be

2 monitor and enforce the compliance with accounting standards and auditing

standards in such manner as may be prescribed

3 oversee the quality of service of the professions associated with ensuring

compliance with such standards and suggest measures required for

improvement in quality of service and such other related matters as may be

prescribed and

4 perform such other functions relating to clauses (a) (b) and (c) as may be

prescribed

7212019 Companies act Audit and accountspdf

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8

Powers of NFRA

bull Powers of NFRA 132(4)

ndash have the power to investigate either suo motu or on a

reference made to it by the Central Government

ndash imposing penalty (5 Lakh 10 Lakhs)

ndash debarring the member or the firm from engaging himself or

itself from practice

Composition of

QRB

983124983144983141 983139983157983154983154983141983150983156 983139983151983149983152983151983155983145983156983145983151983150 983151983142 983156983144983141 983106983151983137983154983140 983139983151983150983155983145983155983156983155 983151983142 983156983144983141 983142983151983148983148983151983159983145983150983143983098983085

983118983151983149983145983150983141983141983155 983151983142 983156983144983141 983107983141983150983156983154983137983148 983111983151983158983141983154983150983149983141983150983156

1 983117983154 983117 983107 983114983151983155983144983145 983113983122983123 (983122983141983156983140) 983110983151983154983149983141983154 983107983144983137983145983154983149983137983150 983107983141983150983156983154983137983148 983106983151983137983154983140 983151983142 983108983145983154983141983139983156 983124983137983160983141983155 983117983145983150983145983155983156983154983161 983151983142 983110983145983150983137983150983139983141 983111983151983158983141983154983150983149983141983150983156 983151983142 983113983150983140983145983137 983118983119983113983108983105991251 983107983144983137983145983154983152983141983154983155983151983150 (983159983141983142 2162012)

2 983117983154 983120 983117983157983154983137983148983145 983117983151983144983137983150983137 983122983137983151 983112983161983140983141983154983137983138983137983140983085 983117983141983149983138983141983154 (983159983141983142 132014)3 983117983154 983117983137983150983151983146 983115983157983149983137983154 983113983105983123 983114983151983145983150983156 983123983141983139983154983141983156983137983154983161 983117983145983150983145983155983156983154983161 983151983142 983107983151983154983152983151983154983137983156983141 983105983142983142983137983145983154983155 983111983151983158983141983154983150983149983141983150983156 983151983142 983113983150983140983145983137 983118983141983159 983108983141983148983144983145 991251983117983141983149983138983141983154 (983159983141983142

1492011)4 983117983154 983126 983123 983123983157983150983140983137983154983141983155983137983150 983107983144983145983141983142 983111983141983150983141983154983137983148 983117983137983150983137983143983141983154 983123983141983139983157983154983145983156983145983141983155 983137983150983140 983109983160983139983144983137983150983143983141 983106983151983137983154983140 983151983142 983113983150983140983145983137 983117983157983149983138983137983145 991251983117983141983149983138983141983154 (983159983141983142 5112012)5 983117983154 983111983137983157983156983137983149 983111983157983144983137 983108983145983154983141983139983156983151983154 983111983141983150983141983154983137983148 (983107983151983149983149983141983154983139983145983137983148983085983113) 983119983142983142983145983139983141 983151983142 983156983144983141 983107983151983149983152983156983154983151983148983148983141983154 amp 983105983157983140983145983156983151983154 983111983141983150983141983154983137983148 983151983142 983113983150983140983145983137 983118983141983159 983108983141983148983144983145 991251 983117983141983149983138983141983154

(983159983141983142 1262012)

983118983151983149983145983150983141983141983155 983151983142 983156983144983141 983107983151983157983150983139983145983148 983151983142 983156983144983141 983113983107983105983113 1 983107983105 983115 983122983137983143983144983157 983120983154983141983155983145983140983141983150983156 983113983107983105983113 983106983137983150983143983137983148983157983154983157 991251 983117983141983149983138983141983154 (983159983141983142 132014)2 983107983105 983117983137983150983151983146 983110983137983140983150983145983155 983126983145983139983141983085983120983154983141983155983145983140983141983150983156 983113983107983105983113 983113983150983140983151983154983141 991251 983117983141983149983138983141983154 (983159983141983142 132014)3 983107983105 983123983157983138983151983140983144 983115 983105983143983154983137983159983137983148 983113983149983149983141983140983145983137983156983141 983120983137983155983156 983120983154983141983155983145983140983141983150983156 983113983107983105983113 983115983151983148983147983137983156983137 991251 983117983141983149983138983141983154 (983159983141983142 132014)4 983107983105 983122983137983146983147983157983149983137983154 983123 983105983140983157983147983145983137 983117983157983149983138983137983145 991251 983117983141983149983138983141983154 (983159983141983142 132014)5 983107983105 983107983144983137983154983137983150983146983151983156 983123983145983150983143983144 983118983137983150983140983137 983118983141983159 983108983141983148983144983145 991251 983117983141983149983138983141983154 (983159983141983142 132014)

983123983152983141983139983145983137983148 983113983150983158983145983156983141983141983155 1 983117983154 983122 983115 983120983137983150983140983137 983111983141983150983141983154983137983148 983117983137983150983137983143983141983154 983122983141983155983141983154983158983141 983106983137983150983147 983151983142 983113983150983140983145983137 983117983157983149983138983137983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831412 983117983154 983120983154983145983156983144983158983145 983112983137983148983140983141983137 983120983137983155983156 983107983151983157983150983139983145983148 983117983141983149983138983141983154 983113983107983105983113 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831413 983117983154 983124 983115983137983154983156983144983145983147983141983161983137983150 983123983141983139983154983141983156983137983154983161 983113983107983105983113 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831414 983117983154983155 983122983141983150983157983147983137 983115983157983149983137983154 983113983105983123 983114983151983145983150983156 983123983141983139983154983141983156983137983154983161 983117983145983150983145983155983156983154983161 983151983142 983107983151983154983152983151983154983137983156983141 983105983142983142983137983145983154983155 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 983145983150983158983145983156983141983141

983123983141983139983154983141983137983156983154983161 983156983151 983156983144983141 9831069831519831379831549831401 983117983154 983117983151983144983145983156 983106983137983145983146983137983148

Financial Review and Reporting Board

Chairman CA Nilesh Vikamsey

Peer Review Board

Chairman CA Naveen N D Guptha

Revision of FS or BR ndash 131

bull ldquoIf it appears FS do not comply with section 129rdquo

bull Revision of any of the 3 preceding FY

bull Approval of tribunal with notice to IT department

bull Tribunal will issue notice amp hear auditor (Audit Working Papers ndashnecessary)

bull Carry out audit procedures necessary to changed circumstances ndashremuneration please ndash [us 142 to be fixed in GM]

bull AS 5 ndash Prior Period Items AS 4 ndash Events Occurring after BS date AS 7 ndash Construction Contracts AS 22 ndash Accounting for Taxes on Income

bull Only one revision allowed unlike gt 1 revision a llowed under IT act

Chapter X ndash Audit amp Auditors

Section Particulars

139 Appointment of auditors

140 Removal resignation of auditor and giving of special notice

141 Eligibility qualifications and disqualifications of auditors

142 Remuneration of auditors

143 Powers and duties of auditors and auditing standards

144 Auditors not to render certain services

145 Auditors to sign audit reports etc

146 Auditors to attend general meeting

147 Punishment for contravention

148 CG to specify audit of items of cost in respect of certain companies

Appointment of Auditors

bull India believes audit rotation is a positive step

bull Rule 6 ndash The Companies (Audit and Auditors) Rules 2014

bull 3 year time frame for implementation ndash Maximum number of

consecutive years for which he may be appointed in the same

company (including the Transitional Period) 3 to 4 years for Individual

auditor 3 to 9 years in case of audit firm

bull Firm Rotation ndash Mandatory

bull Partner Rotation ndash Optional Voluntary ndash Members may resolve to

provide for ndash Section 139(3)

7212019 Companies act Audit and accountspdf

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29-05-2014

9

Applicability of Rotation

bull Section 139(2)

bull Rule 5 The companies (Audit and Auditors) Rules 2014

bull Class of Companies excludes OPC and Small Companies

bull Includes

bull All unlisted public companies having paid up capital of 10 croresor more

bull All private limited companies having paid up capital of 20 croresor more

bull Public borrowings from FI banks public deposits of 50 croresof more

bull 143(12) - Notwithstanding anything contained in this section if an

auditor of a company in the course of the performance of his duties

as auditor has reason to believe that an offence involving fraud is

being or has been committed against the company by officers or

employees of the company he shall immediately report the matter

to the Central Government within such time and in such manner as

may be prescribed

Fraud Reporting ndash Section 143(12)

Rule 13 ndash Report to CG

bull The companies (Audit and Auditors) Rules 2014

bull Fraud is being or has been committed against the company by officers

or employees of the company

bull Report the matter to the CG within 60 days following a procedure

bull Forward his report to board AC (immediately) ndash seeking their reply

within 45 days

bull On receipt of reply forward his report and the reply or observations of

board AC along with his comments to CG within 15 days

bull No reply from Board AC ndash even then forward to CG

Rule 13 ndash Report to CG

bull To whom

bull The Secretary Ministry of Corporate Affairs in a sealed cover by

Registered Post with ack due or Speed Post followed by an e-mail in

confirmation of the same

bull The report shall be on letter head of the auditor containing address e-

mail address and contact number and be signed by the auditor with his

seal and shall indicate his MNo

bull Form ADT-4

bull Your Attention Please This shall apply mutatis-mutandis to cost

accountant in practice and secretarial auditor

Auditors to attend General Meeting

bull 231 (Old) ndash Entitled to attend ndash optional attendance

bull 146 ndash attend either by himself or through his authorised

representative who shall also be qualified to be an auditor

any general meeting and shall have right to be heard at such meeting

on any part of the business which concerns him as the auditor ndash

Mandatory attendance

143 - Powers amp duties of Auditors and

Auditing Standards

bull 143(1)(f) - Share Capital SAMPA ndash Cash COTC where it is stated in thebooks and documents of the company that any shares have been allotted for cashwhether cash has actually been received in respect of such allotment and

if no cash has actually been so received whether the position as stated in the

account books and the balance sheet is correct regular and not

misleading

bull 143(3) ndashThe Auditorrsquos report shall also state (a) to (j) ndash SA 700 705 706 may gofor revision

bull 143(4) ndash Where any of the matters required to be included in the audit report underthis section is answered in the negative or with a qualification the report shall

state the reasons therefor

bull 143(9) - Every auditor shall comply with the auditing standards ndash 58 so

far pronounced by ICAI from SA 200 to SA 4410 ndash SA SQC SIA

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29-05-2014

10

Powers amp duties of Auditors and Auditing

Standards

bull 143 (14) -The provisions of this section shall mutatismutandis apply tomdash

ndash (a) the cost accountant in practice conducting cost audit

under section 148 or

ndash (b) the company secretary in practice conducting secretarial

audit under section 204

141 - Eligibility Qualifications amp

Disqualifications of Auditors

bull Disqualification ndash disappointment

bull Qualification ndash Innovation termination

bull Business Relationship ndash 141(3)(e)

bull Convicted by court ndash 141(3)(h)

bull 20 Companies Limit ndash as per 141(3)(g)

bull 1 Lakh ndash Lakshman Rekha

bull Any other form of entity engaged in 144 services

Eligibility Qualifications amp

Disqualifications of Auditors

ICAI Council Guidelines ndash 2008

For the above purpose the ldquospecified number of audit assignmentsrdquo means ndash

(a) in the case of a Chartered Accountant in practice or a proprietary firm of

Chartered Accountant thirty audit assignments whether in respect of

private Companies or other Companies

(b) in the case of Chartered Accountants in practice thirty audit assignments

per partner in the firm whether in respect of private Companies or other

Companies

Provided that out of such ldquospecified number of audit assignments the

number of audit assignments of public Companies each of which has a paid-up

share capital of rupees twenty-five lakhs or more shall not exceed ten

Appointment of Auditors

bull Appointment Re-appointment are known used terms

bull Retirement Rotation Ratification 5 year break or cooling period ndash

is new eligibility criteria

bull Common Partners same network of audit firms trade mark or Brand

bull Recently US house of representatives approved a Bill that prohibited

the US regulator from mandating audit rotation

bull 147(3) ndash Serious liability

bull refund the remuneration received by him to the company and

bull pay for damages to the company statutory bodies or authorities or to anyother persons for loss arising out of incorrect or misleading statements ofparticulars made in his audit report ndash [Caution Bankers will be First]

bull 147(1) ndash Contravention liable for prosecution ndash 1 year (officer)

bull 147(2) ndash Contravention liable for Fine (25K ndash 5L) ndash prosecution 1111

year amp Fine (1L ndash 25L) (Auditor) ndash see Proviso to 147(2)

bull To provide for insurance cost in the books of accounts of professional firms ndash the

best insurance is Professional Integrity

bull 147 use the word Auditor (includes CMACS) ndash yes ndash refer 143(14)

bull Council Guidelines No1-CA(7)022008 dated 8th August 2008 -

GUIDELINES FOR THE MEMBERS OF ICAI

bull New provision

bull 144 ndash Restriction ndash One side | Independence ndash Other Side

983109983160983152983148983137983150983137983156983145983151983150983098 983124 he term ldquodirectly or indirectlyrdquo shall include rendering of services by the auditormdash

1 in case of auditor being an individual either himself or through his relative or any other person

connected or associated with such individual or through any other entity whatsoever in

which such individual has significant influence or control or whose name or trade mark orbrand is used by such individual

2 in case of auditor being a firm either itself or through any of its partners or through its parent

subsidiary or associate entity or through any other entity whatsoever in which the firm or

any partner of the firm has significant influence or control or whose name or trade mark orbrand is used by the firm or any of its partners

Auditor not to render certain

services

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29-05-2014

11

a) accounting and book keeping services

b) internal audit

c) design and implementation of any financial information system

d) actuarial services

e) investment advisory services

f) investment banking services

g) rendering of outsourced financial services

h) management services and

i) any other kind of services as may be prescribed

Statutory Warning Say no to these services ndash Section 144

983107983144983137983152983156983141983154 983113983128 983085 983105983152983152983151983145983150983156983149983141983150983156 983137983155 983123983156983137983156983157983156983151983154983161 983137983157983140983145983156983151983154

983080983141983160983156983154983137983139983156 983142983154983151983149 983113983107983105983113 983107983151983157983150983139983145983148 983111983157983145983140983141983148983145983150983141983155 983085 983090983088983088983096983081

bull A member of the Institute in practice shall not accept the appointment as statutory

auditor of Public Sector Undertaking(s) Government Company(ies)Listed

Company(ies) and other Public Company(ies) having turnover of Rs 50 crores

or more in a year where he accepts any other work(s) or assignment(s) or

service(s) in regard to the same Undertaking(s) Company(ies) on a remuneration which in

total exceeds the fee payable for carrying out the statutory audit of the same

Undertakingcompany

bull In regard to taking up other work(s) or service(s) or assignment(s) of the

undertakingcompany referred to above it shall be open to such associate concern or

corporate body to render such work(s) or service(s) or assignment(s) so long as

aggregate remuneration for such other work(s) or service(s) or assignment(s)

payable to the statutory auditors together with fees payable to its associate

concern(s) or corporate body(ies) dodoes not exceed the aggregate of fee

payable for carrying out the statutory audit

983107983105983086 983111983119983120983105983116 983115983122983113983123983112983118983105 983122983105983114983125 | FCA AICWA ACS PGDOR PGDFM DISA (ICA) MPhil

Tax Partner Ms K Gopal Rao amp Co Chartered Accountants Chennai

Member ndash Southern India Regional Council of The Institute of Chartered Accountants of India

Email gkricaiorg | Mobile 98400 63269

7212019 Companies act Audit and accountspdf

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29-05-2014

2

The Companies (Accounts) Rules 2014Rules Particulars ndash 13 Rules

1 Short title and commencement

2 Definitions

3 Manner of Books of Accounts to be kept in electronic form

4 Conditions regarding maintenance amp inspection of certain financial information by directors

5 Form of statement containing the salient features of financial statements of subsidiaries

6 Manner of Consolidation of accounts

7 Transitional provisions with respect t o accounting standards

8 Matters to be included in Boardrsquos Report

9 Disclosure about CSR Policy

10 Statement containing salient features of financial statements

11 Manner of circulation of financial statements in certain cases

12 Filing of financial statements and fees to be paid thereon

13 Companies required to appoint Internal Auditor

The Companies (Accounts) Rules 2014

Rules Particulars ndash 13 Rules Form

1 Short title and commencement -

2 Definitions -

3 Manner of Books of Accounts to be kept in electronic form -

4 Conditions regarding maintenance amp inspection of certain financial information by directors -

5 Form of statement containing the salient features of financial statements of subsidiaries AOC-1

6 Manner of Consolidation of accounts -

7 Transitional provisions with respect to accounting st andards -

8 Matters to be included in Boardrsquos Report AOC-2

9 Disclosure about CSR Policy -

10 Statement containing salient features of financial st atements AOC-3

11 Manner of circulation of financial statements in certain cases -

12 Filing of financial statements and fees to be paid thereon AOC-4

13 Companies required to appoint Internal Auditor -

Chapter X ndash Audit amp Auditors

Section Particulars ndash 10 sections notified with rules

139 Appointment of auditors

140 Removal resignation of auditor and giving of special notice

141 Eligibility qualifications and disqualifications of auditors

142 Remuneration of auditors

143 Powers and duties of auditors and auditing standards

144 Auditors not to render certain services

145 Auditors to sign audit reports etc

146 Auditors to attend general meeting

147 Punishment for contravention

148 CG to specify audit of items of cost in respect of certain companies

The Companies (Audit and Auditors) Rules 2014

Rule Particulars ndash 14 Rules

1 Short title and commencement

2 Definitions

3 Manner and procedure of selection and appointment of auditors

4 Conditions for appointment and notice to Registrar

5 Class of Companies

6 Manner of rotation of auditors by the companies on expiry of their term

7 Removal of the auditor before expiry of his term

8 Resignation of auditor

9 Liability to devolve on concerned partners only

10 Disqualifications of auditor

11 Other matters to be included in auditors report

12 Duties amp powers of the companyrsquos auditor with reference to the audit of the branch amp the branch auditor

13 Reporting of Frauds by Auditor

14 Remuneration of the Cost Auditor

The Companies (Audit and Auditors) Rules 2014

Rule Particulars ndash 14 Rules ndash 4 Forms Forms

1 Short title and commencement -

2 Definitions -

3 Manner and procedure of selection and appointment of auditors -

4 Conditions for appointment and notice to Registrar ADT-1

5 Class of Companies -

6 Manner of rotation of auditors by the companies on expiry of their term -

7 Removal of the auditor before expiry of his term ADT-2

8 Resignation of auditor ADT-3

9 Liability to devolve on concerned partners only -

10 Disqualifications of auditor -

11 Other matters to be included in auditors report -

12 Duties amp powers of the companyrsquos auditor with reference to the audit of the branch amp the branch

auditor

-

13 Reporting of Frauds by Auditor ADT-4

14 Remuneration of the Cost Auditor -

bull Useful lives to compute depreciation

bull Silent Revolution is Depreciation

bull From rates-provided regime To useful-life regime ndashPrescribed

bull Method of depreciation ndash Choice

bull Significant table work (increased reduced)

bull Useful Life ndash Age = Remaining life

bull Revised GN on Transition accounting on depreciation

bull Residual Value

7212019 Companies act Audit and accountspdf

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29-05-2014

3

Schedule II - Depreciation

Part A

bull Depreciation = Cost ndash Residual Value

bull Useful Lives = Available for use

bull Depreciation includes amortization

bull Useful life in part C is maximum

bull Can we have useful life less than Part C

bull 15 parts

bull For intangible assets = provision of AS-26 is applicable forthe time being in force except PPP projects

Schedule IISchedule IISchedule IISchedule II ndash ndashndash ndash Part BPart BPart BPart B

Part Bbull The useful life or residual life of any specific asset as

notified for accounting purposes by a regulatory authorityshall be applied

bull NESD ndash No extra shift depreciation

bull Life is less than schedule II ndash Disclose

bull Methods of depreciation ndash Disclose

bull Methods ndash Silent SLM WDV Annuity Sum of theyears digits Units of production

bull Max Life ndash 60 years (building other than factory buildingwith RCC frame)

Componentizationhellip

Part Bhellip

bull Min Life ndash 3 years ndash End user devices viz desktops laptops pads

amp temporary structures

bull Componentization of assets Note 4 to Schedule

bull Useful life is for whole of the asset where cost of a part of the

asset is significant to total cost of the asset and useful life of that

part is different from the useful life then separate UL is

applicable for that part

Schedule II - UL

Part Chellip snippets

bull Plant amp Machinery ndash General (CPP ndash 25 years Others ndash 15

years)

bull PampM ndash Special

bull Motor Vehicles ndash 10 years

bull Hire Vehicles ndash 6 years

SCHEME OF THE ACT

470Sections

29 Chapters7 Schedules

A very substantial part of the Act is in the form of ruleswhich are being prescribed separately

658Sections

13 Parts15Schedules

1 Accounting Standards

2 Associate Company

3 Auditing Standards

4 Authorised Capital

5 Books of Accounts

6 Called up capital

7 Charge

8 Chartered Accountant

9 Chief Executive Officer

10 Chief Financial Officer

11 Company Limited By Guarantee

12 Company Limited by Shares

13 Company Liquidator

14 Contributory

15 Control

16 Cost Accountant

17 Deposit

18 Expert

19 Financial Institution

20 Financial Statement

21 Foreign Company

22 Free Reserves

23 Global Depository Receipts

24 Independent Director

25 Indian Depository Receipt

26 Interested Director

27 Issued Capital

28 Key Managerial Personnel

29 Notification

30 Official Liquidator

31 One Person Company

32 Ordinary or Special Resolution

33 Postal Ballot

34 Promoter

35 Public Financial Institution

36 Register of Companies

37 Related Party

38 Remuneration

39 Serious Fraud InvestigationOffice

40 Small Company

41 Subscribed capital

42 Sweat Equity Shares

43 Turnover

44 Unlimited Company

45 Voting Right

46 Whole Time Director

983118983141983159 983108983141983142983145983150983145983156983145983151983150983155 983145983150983156983154983151983140983157983139983141983140 983145983150 983123983141983139983156983145983151983150 983090983098983085

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29-05-2014

4

bull 2(18) ldquoChief Executive Officerrdquo means an officer of a company who

has been designated as such by it

bull 2(19) ldquoChief Financial Officerrdquo means a person appointed as a Chief

Financial Officer of a company

bull 2(66) ldquoprescribedrdquo means prescribed by rules made under this Act

983108983109983110983113983118983113983124983113983119983118983123 983127983112983113983107983112 983112983105983126983109 983106983109983109983118 983108983113983123983107983119983118983124983113983118983125983109983108

District Court

Industrial Company

Industrial Undertaking

Information memorandum

Issued generally

State Level Institution

Option in Securities

Operating Agency

Public Holiday

Share with Differential Rights

Sick Industrial Company

983108983109983110983113983118983113983124983113983119983118983123 983127983112983113983107983112 983112983105983126983109 983106983109983109983118 983108983113983123983107983119983118983124983113983118983125983109983108

District Court

Industrial Company

Industrial Undertaking

Information memorandum

Issued generally

State Level Institution

Option in Securities

Operating Agency

Public Holiday

Share with Differential Rights

Sick Industrial Company

ldquofinancial statementrdquo in relation to a company includesmdash

i a balance sheet as at the end of the financial year

ii a profit and loss account or in the case of a company carrying on any activity not

for profit an income and expenditure account for the financial year

iii cash flow statement for the financial year

iv a statement of changes in equity if applicable and

v any explanatory note annexed to or forming part of any document referred to in

sub-clause (i) to sub-clause (iv)

One Person Company Small Company Dormant Company ndash may not include Cash

Flow Statement

Financial Statement ndash 2(40)

Meaning ldquoFinancial yearrdquo in relation to any company or body corporate

means the period ending on the 31st day of March every year

Breathing time within a period of two years from such

commencement align its financial year as per the provisions of this

clause

Exception Incorporated on or after 1st January of a year then the period

ending on the 31st day of March if the following year

Financial Year ndash 2(41)

Relative ndash 2(77)

lsquolsquorelativersquorsquo with reference to any person means any one who is related

to another if mdash

i they are members of a Hindu Undivided Family

ii they are husband and wife or

iii one person is related to the other in such manner as may

be prescribed

List of Relatives as prescribed ndash only 8 only 8 only 8 only 8bull The Companies (Specification of definitions details) Rules 2014

bull Rule 4

bull A person shall be deemed to be the relative of another if he or she is related to another in the

following manner namely-

1 983110983137983156983144983141983154 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983110983137983156983144983141983154)

983090 983117983151983156983144983141983154 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983117983151983156983144983141983154)

983091 983123983151983150 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983123983151983150)

983092 983123983151983150991257983155 983127983145983142983141

983093 983108983137983157983143983144983156983141983154

983094 983108983137983157983143983144983156983141983154991257983155 983112983157983155983138983137983150983140

983095 983106983154983151983156983144983141983154 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983106983154983151983156983144983141983154)

983096 983123983145983155983156983141983154 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983123983145983155983156983141983154)

What happened to Step-Daughter Is she not a relative

7212019 Companies act Audit and accountspdf

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5

Expert - Section 2(38)

bull Definition - ldquoexpertrdquo includes an engineer a valuer a

chartered accountant a company secretary a cost accountant

and any other person who has the power or authority to issue a

certificate in pursuance of any law for the time being in force

Professional Indemnity Insurance ndash need of the hour

bull 247(4) ndash Serious liabilitybull refund the remuneration received by him to the company and

bull pay for damages to the company or to any other person for lossarising out of incorrect or misleading statements of particulars made

in his report

All companies having subsidiary(s) need to prepare consolidated

accounts

ldquoSubsidiaryrdquo includes associate and joint ventures

Rule 5 amp 6 ndash The Companies (Accounts) Rules 2014

Form AOC-1 The Statement containing salient features of the

FS of subsidiaries associate companies Joint ventures

Consolidation of Accounts 129(3)Consolidation of Accounts 129(3)Consolidation of Accounts 129(3)Consolidation of Accounts 129(3)

1956 Position

Consolidated is not mandated for any company

Only listing agreement requires consolidation for listed companies

having subsidiaries (clause 32 of Listing agreement and AS 21)

Chapter IX ndash Accounts of Companies

Section Particulars

128 Books of Account etc to be kept by company

129 Financial Statement

130 Re-opening of accounts on courtrsquos or tribunalrsquos orders

131 Voluntary revision of financial statements or Boardrsquos Report

132 Constitution of National Financial Reporting Authority

133 Central Government to prescribe accounting standards

134 Financial statement Boardrsquos Report etc

135 Corporate Social Responsibility

136 Right of member to copies of audited financial statement

137 Copy of financial statement to be filed with registrar

138 Internal Audit

ldquobook and paperrdquoand ldquobook or paperrdquo include

Books of account

Deeds

Vouchers

Writings

Documents

Minutes and registers maintained on paper or in electronic form

book and paper and book or paper- 2(12)

ldquobooks of accountrdquo includes records maintained in respect of mdash

1 a ll sums of money received and expended by a company and matters inrelation to which the receipts and expenditure take place

2 all sales and purchases of goods and services by the company

3 the assets and liabilities of the company and

4 the items of cost as may be prescribed under section 148 in the case of acompany which belongs to any class of companies specified under that

section

Refer us 209(1) of The Companies Act 1956

Books of Account - 2(13)

7212019 Companies act Audit and accountspdf

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6

Transitional provisions with respect to

Accounting Standards

bull The Companies (Accounts) Rules 2014

bull Rule 7

bull ICAI ndash AS continues as on date Standards as specified under companies

act 1956 shall be deemed to be the accounting standards until accounting

standards are specified by central government us 133

bull NACAS as of now NFRA later Till NFRA is constituted us 132 the central

government may prescribe the accounting standard or any addendum as

recommended by ICAI in consultation with and after examination of

recommendations made by NACAS constituted us 210A of companies Act

1956

NACAS National Advisory Committee on Accounting Standards

E-Mode ndash Rule 3

bull The Companies (Accounts) Rules 2014

bull Books of Accounts ndash Accessible (in India) Complete unaltered

bull C I A ndash Principles of Information Security but C is missing ndash only IampA is

addressed in rule

bull Rule 3(6) The company shall intimate to the registrar on an annual

basis at the time of filing of financial statement

a Name of the service provider

b The internet protocol address of service provider

c The location of the service provider (wherever applicable)

d Where the books of account and other books and papers are maintained on cloud

such address (physical) as provided by the service provider

E-Mode

bull Financial Statements ndash Section 136 ndash (Right of members to copies of audited

financial statements)

bull 21 days Notice to be sent

bull Along with a copy of the financial statements including consolidated

financial statements if any auditorrsquos report and every other documentrequired by law to be annexed or attached to the financial statements

bull To be Hosted in Website ndash Listed Company (as per Act)

E-Mode

bull The Companies (Accounts) Rules 2014

bull Rule 11 May be sent in e-mode ndash

bull All listed companies and all public companies having Net-worth gt 1 Cr amp

Turnover gt 10 Cr ndash the financial statements may be sent ndash

a By electronic mode to such members whose shareholding is in de-mat form and

whose email ids are registered with depository for communication purposes

b Where shareholding is held otherwise than by dematerialized format to such

members who have positively consented in writing for receiving by electronic mode

and

c By dispatch of physical copies through any recognized mode of delivery as specified

us 20

Boardrsquos Report shall also contain

bull The Companies (Accounts) Rules 2014

bull Rule 8 (5) Boardrsquos Report shall also contain

i the financial summary or highlights

ii the change in the nature of business if any

i ii th e details of directors or key managerial personnel who were appointed or have

resigned during the year

iv the names of companies which have become or ceased to be its Subsidiaries joint

ventures or associate companies during the year

bull The Companies (Accounts) Rules 2014

bull Rule 8 (5) Boardrsquos Report shall also contain

(v) the details relating to deposits covered under Chapter V of the Act-

(a) accepted during the year

(b) remained unpaid or unclaimed as at the end of the year

(c) whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so

number of such cases an d the total amount involved-

ndash (i) at the beginning of the year

ndash (ii) maximum during the year

ndash (iii) at the end of the year

(vi) the details of deposits which are not in compliance with the requirements of Chapter V of

the Act

(vii) the details of significant and material orders passed by the r egulators or courts or tribunals

impacting the going concern status and companyrsquos operations in future

(viii) the details in respect of adequacy of internal financial controls with reference to the

Financial Statements

7212019 Companies act Audit and accountspdf

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7

All companies including private companies who are meeting

eligibility criteria (NW ge 500 cr Turnover ge 1000 cr NP ge 5 cr)

are required to constitute a CSR committee consisting of at

least 3 directors out of which 1 must be ID and spend at least

2 of average NP on CSR activities

Corporate Social Responsibility 135Corporate Social Responsibility 135Corporate Social Responsibility 135Corporate Social Responsibility 135

1956 Position

No requirement to spend on CSR activties

CSR ndash Sec 135 amp CSR Rules

bull Net Profit ndash PBT

bull Tax treatment of CSR in accordance with proposed notification (beingstatutory expenditure ndash should be tax deductible) -

bull Professional Opportunity ndash Company Setup Trust Section 8 company Society

bull Other Trusts ndash minimum 3 year track record ndash CEO of IICA ndash DirectorGeneral Mr Bhaskar Chatterjee ndash Accreditation to NGOs ndash Govt Ratingfor NPOs ndash Partnering with ldquo Tata institute of social sciencesrdquo

bull CSR Index ndash BSE amp IICA ndash To Develop

bull Min 8000 eligible companies

bull Min Rs 12000 crores pay-off

138 - Internal Audit

bull Welcome move ndash Professional opportunity ndash Mandatory IA for listed amp Public

companies

bull CA CMA Board nominated professional

bull Rule is silent ndash Board AC to formulate - Scope Functioning periodicity

amp methodology in consultation with IA

bull Internal Auditor may or may not be

an employee of the company

bull CA means a CA whether engaged in

practice or not

Rule 13

The Companies (Accounts) Rules 2014 (all limits in preceding FY)

983110983151983148983148983151983159983145983150983143 983139983151983149983152983137983150983145983141983155 983156983151 983137983152983152983151983145983150983156 983113983150983156983141983154983150983137983148 983105983157983140983145983156983151983154 983149983137983150983140983137983156983151983154983145983148983161

983159983145983156983144983145983150 983094 983149983151983150983156983144983155 983151983142 983139983151983149983149983141983150983139983141983149983141983150983156 983151983142 983155983141983139983156983145983151983150

o Listed company

o Unlisted public company

bull Paid-up capital ge 50 crores

bull Turnover ge 200 crores

bull Os Loans or borrowings ge 100 crores

bull Os Deposits ge 25 crores

o Private Company

bull Turnover ge 200 crores

bull Os Loans or borrowings ge 100 crores (from banks or PFIs)

Rule 13(1) To appoint an internal auditor or a firm of internal auditors

NFRA

National Financial Reporting Authority

bull To be constituted by a notification of the Central Government

bull It shall consist of a Chairman (to be appointed by CG) and other members not

exceeding 15 in number

bull Chairperson and members shall make a declaration to the Central Government

regarding no conflict of interest or lack of independence in respect of his or

their appointment

bull Chairperson and members who are in full-time employment with NFRA 983155983144983137983148983148 983150983151983156

983138983141 983137983155983155983151983139983145983137983156983141983140 983159983145983156983144 983137983150983161 983137983157983140983145983156 983142983145983154983149 (including related consultancy firms) during the

course of their appointment and two years after ceasing to hold such

appointment

Constitution of NFRA

bull Yet to constitute by notification ndash Still in Draft Rules stage

bull Role of NFRA 132(2)

1 make recommendations to the Central Government on the formulation and laying

down of accounting and auditing policies and standards for adoption by

companies or class of companies or their auditors as the case may be

2 monitor and enforce the compliance with accounting standards and auditing

standards in such manner as may be prescribed

3 oversee the quality of service of the professions associated with ensuring

compliance with such standards and suggest measures required for

improvement in quality of service and such other related matters as may be

prescribed and

4 perform such other functions relating to clauses (a) (b) and (c) as may be

prescribed

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8

Powers of NFRA

bull Powers of NFRA 132(4)

ndash have the power to investigate either suo motu or on a

reference made to it by the Central Government

ndash imposing penalty (5 Lakh 10 Lakhs)

ndash debarring the member or the firm from engaging himself or

itself from practice

Composition of

QRB

983124983144983141 983139983157983154983154983141983150983156 983139983151983149983152983151983155983145983156983145983151983150 983151983142 983156983144983141 983106983151983137983154983140 983139983151983150983155983145983155983156983155 983151983142 983156983144983141 983142983151983148983148983151983159983145983150983143983098983085

983118983151983149983145983150983141983141983155 983151983142 983156983144983141 983107983141983150983156983154983137983148 983111983151983158983141983154983150983149983141983150983156

1 983117983154 983117 983107 983114983151983155983144983145 983113983122983123 (983122983141983156983140) 983110983151983154983149983141983154 983107983144983137983145983154983149983137983150 983107983141983150983156983154983137983148 983106983151983137983154983140 983151983142 983108983145983154983141983139983156 983124983137983160983141983155 983117983145983150983145983155983156983154983161 983151983142 983110983145983150983137983150983139983141 983111983151983158983141983154983150983149983141983150983156 983151983142 983113983150983140983145983137 983118983119983113983108983105991251 983107983144983137983145983154983152983141983154983155983151983150 (983159983141983142 2162012)

2 983117983154 983120 983117983157983154983137983148983145 983117983151983144983137983150983137 983122983137983151 983112983161983140983141983154983137983138983137983140983085 983117983141983149983138983141983154 (983159983141983142 132014)3 983117983154 983117983137983150983151983146 983115983157983149983137983154 983113983105983123 983114983151983145983150983156 983123983141983139983154983141983156983137983154983161 983117983145983150983145983155983156983154983161 983151983142 983107983151983154983152983151983154983137983156983141 983105983142983142983137983145983154983155 983111983151983158983141983154983150983149983141983150983156 983151983142 983113983150983140983145983137 983118983141983159 983108983141983148983144983145 991251983117983141983149983138983141983154 (983159983141983142

1492011)4 983117983154 983126 983123 983123983157983150983140983137983154983141983155983137983150 983107983144983145983141983142 983111983141983150983141983154983137983148 983117983137983150983137983143983141983154 983123983141983139983157983154983145983156983145983141983155 983137983150983140 983109983160983139983144983137983150983143983141 983106983151983137983154983140 983151983142 983113983150983140983145983137 983117983157983149983138983137983145 991251983117983141983149983138983141983154 (983159983141983142 5112012)5 983117983154 983111983137983157983156983137983149 983111983157983144983137 983108983145983154983141983139983156983151983154 983111983141983150983141983154983137983148 (983107983151983149983149983141983154983139983145983137983148983085983113) 983119983142983142983145983139983141 983151983142 983156983144983141 983107983151983149983152983156983154983151983148983148983141983154 amp 983105983157983140983145983156983151983154 983111983141983150983141983154983137983148 983151983142 983113983150983140983145983137 983118983141983159 983108983141983148983144983145 991251 983117983141983149983138983141983154

(983159983141983142 1262012)

983118983151983149983145983150983141983141983155 983151983142 983156983144983141 983107983151983157983150983139983145983148 983151983142 983156983144983141 983113983107983105983113 1 983107983105 983115 983122983137983143983144983157 983120983154983141983155983145983140983141983150983156 983113983107983105983113 983106983137983150983143983137983148983157983154983157 991251 983117983141983149983138983141983154 (983159983141983142 132014)2 983107983105 983117983137983150983151983146 983110983137983140983150983145983155 983126983145983139983141983085983120983154983141983155983145983140983141983150983156 983113983107983105983113 983113983150983140983151983154983141 991251 983117983141983149983138983141983154 (983159983141983142 132014)3 983107983105 983123983157983138983151983140983144 983115 983105983143983154983137983159983137983148 983113983149983149983141983140983145983137983156983141 983120983137983155983156 983120983154983141983155983145983140983141983150983156 983113983107983105983113 983115983151983148983147983137983156983137 991251 983117983141983149983138983141983154 (983159983141983142 132014)4 983107983105 983122983137983146983147983157983149983137983154 983123 983105983140983157983147983145983137 983117983157983149983138983137983145 991251 983117983141983149983138983141983154 (983159983141983142 132014)5 983107983105 983107983144983137983154983137983150983146983151983156 983123983145983150983143983144 983118983137983150983140983137 983118983141983159 983108983141983148983144983145 991251 983117983141983149983138983141983154 (983159983141983142 132014)

983123983152983141983139983145983137983148 983113983150983158983145983156983141983141983155 1 983117983154 983122 983115 983120983137983150983140983137 983111983141983150983141983154983137983148 983117983137983150983137983143983141983154 983122983141983155983141983154983158983141 983106983137983150983147 983151983142 983113983150983140983145983137 983117983157983149983138983137983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831412 983117983154 983120983154983145983156983144983158983145 983112983137983148983140983141983137 983120983137983155983156 983107983151983157983150983139983145983148 983117983141983149983138983141983154 983113983107983105983113 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831413 983117983154 983124 983115983137983154983156983144983145983147983141983161983137983150 983123983141983139983154983141983156983137983154983161 983113983107983105983113 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831414 983117983154983155 983122983141983150983157983147983137 983115983157983149983137983154 983113983105983123 983114983151983145983150983156 983123983141983139983154983141983156983137983154983161 983117983145983150983145983155983156983154983161 983151983142 983107983151983154983152983151983154983137983156983141 983105983142983142983137983145983154983155 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 983145983150983158983145983156983141983141

983123983141983139983154983141983137983156983154983161 983156983151 983156983144983141 9831069831519831379831549831401 983117983154 983117983151983144983145983156 983106983137983145983146983137983148

Financial Review and Reporting Board

Chairman CA Nilesh Vikamsey

Peer Review Board

Chairman CA Naveen N D Guptha

Revision of FS or BR ndash 131

bull ldquoIf it appears FS do not comply with section 129rdquo

bull Revision of any of the 3 preceding FY

bull Approval of tribunal with notice to IT department

bull Tribunal will issue notice amp hear auditor (Audit Working Papers ndashnecessary)

bull Carry out audit procedures necessary to changed circumstances ndashremuneration please ndash [us 142 to be fixed in GM]

bull AS 5 ndash Prior Period Items AS 4 ndash Events Occurring after BS date AS 7 ndash Construction Contracts AS 22 ndash Accounting for Taxes on Income

bull Only one revision allowed unlike gt 1 revision a llowed under IT act

Chapter X ndash Audit amp Auditors

Section Particulars

139 Appointment of auditors

140 Removal resignation of auditor and giving of special notice

141 Eligibility qualifications and disqualifications of auditors

142 Remuneration of auditors

143 Powers and duties of auditors and auditing standards

144 Auditors not to render certain services

145 Auditors to sign audit reports etc

146 Auditors to attend general meeting

147 Punishment for contravention

148 CG to specify audit of items of cost in respect of certain companies

Appointment of Auditors

bull India believes audit rotation is a positive step

bull Rule 6 ndash The Companies (Audit and Auditors) Rules 2014

bull 3 year time frame for implementation ndash Maximum number of

consecutive years for which he may be appointed in the same

company (including the Transitional Period) 3 to 4 years for Individual

auditor 3 to 9 years in case of audit firm

bull Firm Rotation ndash Mandatory

bull Partner Rotation ndash Optional Voluntary ndash Members may resolve to

provide for ndash Section 139(3)

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29-05-2014

9

Applicability of Rotation

bull Section 139(2)

bull Rule 5 The companies (Audit and Auditors) Rules 2014

bull Class of Companies excludes OPC and Small Companies

bull Includes

bull All unlisted public companies having paid up capital of 10 croresor more

bull All private limited companies having paid up capital of 20 croresor more

bull Public borrowings from FI banks public deposits of 50 croresof more

bull 143(12) - Notwithstanding anything contained in this section if an

auditor of a company in the course of the performance of his duties

as auditor has reason to believe that an offence involving fraud is

being or has been committed against the company by officers or

employees of the company he shall immediately report the matter

to the Central Government within such time and in such manner as

may be prescribed

Fraud Reporting ndash Section 143(12)

Rule 13 ndash Report to CG

bull The companies (Audit and Auditors) Rules 2014

bull Fraud is being or has been committed against the company by officers

or employees of the company

bull Report the matter to the CG within 60 days following a procedure

bull Forward his report to board AC (immediately) ndash seeking their reply

within 45 days

bull On receipt of reply forward his report and the reply or observations of

board AC along with his comments to CG within 15 days

bull No reply from Board AC ndash even then forward to CG

Rule 13 ndash Report to CG

bull To whom

bull The Secretary Ministry of Corporate Affairs in a sealed cover by

Registered Post with ack due or Speed Post followed by an e-mail in

confirmation of the same

bull The report shall be on letter head of the auditor containing address e-

mail address and contact number and be signed by the auditor with his

seal and shall indicate his MNo

bull Form ADT-4

bull Your Attention Please This shall apply mutatis-mutandis to cost

accountant in practice and secretarial auditor

Auditors to attend General Meeting

bull 231 (Old) ndash Entitled to attend ndash optional attendance

bull 146 ndash attend either by himself or through his authorised

representative who shall also be qualified to be an auditor

any general meeting and shall have right to be heard at such meeting

on any part of the business which concerns him as the auditor ndash

Mandatory attendance

143 - Powers amp duties of Auditors and

Auditing Standards

bull 143(1)(f) - Share Capital SAMPA ndash Cash COTC where it is stated in thebooks and documents of the company that any shares have been allotted for cashwhether cash has actually been received in respect of such allotment and

if no cash has actually been so received whether the position as stated in the

account books and the balance sheet is correct regular and not

misleading

bull 143(3) ndashThe Auditorrsquos report shall also state (a) to (j) ndash SA 700 705 706 may gofor revision

bull 143(4) ndash Where any of the matters required to be included in the audit report underthis section is answered in the negative or with a qualification the report shall

state the reasons therefor

bull 143(9) - Every auditor shall comply with the auditing standards ndash 58 so

far pronounced by ICAI from SA 200 to SA 4410 ndash SA SQC SIA

7212019 Companies act Audit and accountspdf

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29-05-2014

10

Powers amp duties of Auditors and Auditing

Standards

bull 143 (14) -The provisions of this section shall mutatismutandis apply tomdash

ndash (a) the cost accountant in practice conducting cost audit

under section 148 or

ndash (b) the company secretary in practice conducting secretarial

audit under section 204

141 - Eligibility Qualifications amp

Disqualifications of Auditors

bull Disqualification ndash disappointment

bull Qualification ndash Innovation termination

bull Business Relationship ndash 141(3)(e)

bull Convicted by court ndash 141(3)(h)

bull 20 Companies Limit ndash as per 141(3)(g)

bull 1 Lakh ndash Lakshman Rekha

bull Any other form of entity engaged in 144 services

Eligibility Qualifications amp

Disqualifications of Auditors

ICAI Council Guidelines ndash 2008

For the above purpose the ldquospecified number of audit assignmentsrdquo means ndash

(a) in the case of a Chartered Accountant in practice or a proprietary firm of

Chartered Accountant thirty audit assignments whether in respect of

private Companies or other Companies

(b) in the case of Chartered Accountants in practice thirty audit assignments

per partner in the firm whether in respect of private Companies or other

Companies

Provided that out of such ldquospecified number of audit assignments the

number of audit assignments of public Companies each of which has a paid-up

share capital of rupees twenty-five lakhs or more shall not exceed ten

Appointment of Auditors

bull Appointment Re-appointment are known used terms

bull Retirement Rotation Ratification 5 year break or cooling period ndash

is new eligibility criteria

bull Common Partners same network of audit firms trade mark or Brand

bull Recently US house of representatives approved a Bill that prohibited

the US regulator from mandating audit rotation

bull 147(3) ndash Serious liability

bull refund the remuneration received by him to the company and

bull pay for damages to the company statutory bodies or authorities or to anyother persons for loss arising out of incorrect or misleading statements ofparticulars made in his audit report ndash [Caution Bankers will be First]

bull 147(1) ndash Contravention liable for prosecution ndash 1 year (officer)

bull 147(2) ndash Contravention liable for Fine (25K ndash 5L) ndash prosecution 1111

year amp Fine (1L ndash 25L) (Auditor) ndash see Proviso to 147(2)

bull To provide for insurance cost in the books of accounts of professional firms ndash the

best insurance is Professional Integrity

bull 147 use the word Auditor (includes CMACS) ndash yes ndash refer 143(14)

bull Council Guidelines No1-CA(7)022008 dated 8th August 2008 -

GUIDELINES FOR THE MEMBERS OF ICAI

bull New provision

bull 144 ndash Restriction ndash One side | Independence ndash Other Side

983109983160983152983148983137983150983137983156983145983151983150983098 983124 he term ldquodirectly or indirectlyrdquo shall include rendering of services by the auditormdash

1 in case of auditor being an individual either himself or through his relative or any other person

connected or associated with such individual or through any other entity whatsoever in

which such individual has significant influence or control or whose name or trade mark orbrand is used by such individual

2 in case of auditor being a firm either itself or through any of its partners or through its parent

subsidiary or associate entity or through any other entity whatsoever in which the firm or

any partner of the firm has significant influence or control or whose name or trade mark orbrand is used by the firm or any of its partners

Auditor not to render certain

services

7212019 Companies act Audit and accountspdf

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11

a) accounting and book keeping services

b) internal audit

c) design and implementation of any financial information system

d) actuarial services

e) investment advisory services

f) investment banking services

g) rendering of outsourced financial services

h) management services and

i) any other kind of services as may be prescribed

Statutory Warning Say no to these services ndash Section 144

983107983144983137983152983156983141983154 983113983128 983085 983105983152983152983151983145983150983156983149983141983150983156 983137983155 983123983156983137983156983157983156983151983154983161 983137983157983140983145983156983151983154

983080983141983160983156983154983137983139983156 983142983154983151983149 983113983107983105983113 983107983151983157983150983139983145983148 983111983157983145983140983141983148983145983150983141983155 983085 983090983088983088983096983081

bull A member of the Institute in practice shall not accept the appointment as statutory

auditor of Public Sector Undertaking(s) Government Company(ies)Listed

Company(ies) and other Public Company(ies) having turnover of Rs 50 crores

or more in a year where he accepts any other work(s) or assignment(s) or

service(s) in regard to the same Undertaking(s) Company(ies) on a remuneration which in

total exceeds the fee payable for carrying out the statutory audit of the same

Undertakingcompany

bull In regard to taking up other work(s) or service(s) or assignment(s) of the

undertakingcompany referred to above it shall be open to such associate concern or

corporate body to render such work(s) or service(s) or assignment(s) so long as

aggregate remuneration for such other work(s) or service(s) or assignment(s)

payable to the statutory auditors together with fees payable to its associate

concern(s) or corporate body(ies) dodoes not exceed the aggregate of fee

payable for carrying out the statutory audit

983107983105983086 983111983119983120983105983116 983115983122983113983123983112983118983105 983122983105983114983125 | FCA AICWA ACS PGDOR PGDFM DISA (ICA) MPhil

Tax Partner Ms K Gopal Rao amp Co Chartered Accountants Chennai

Member ndash Southern India Regional Council of The Institute of Chartered Accountants of India

Email gkricaiorg | Mobile 98400 63269

7212019 Companies act Audit and accountspdf

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3

Schedule II - Depreciation

Part A

bull Depreciation = Cost ndash Residual Value

bull Useful Lives = Available for use

bull Depreciation includes amortization

bull Useful life in part C is maximum

bull Can we have useful life less than Part C

bull 15 parts

bull For intangible assets = provision of AS-26 is applicable forthe time being in force except PPP projects

Schedule IISchedule IISchedule IISchedule II ndash ndashndash ndash Part BPart BPart BPart B

Part Bbull The useful life or residual life of any specific asset as

notified for accounting purposes by a regulatory authorityshall be applied

bull NESD ndash No extra shift depreciation

bull Life is less than schedule II ndash Disclose

bull Methods of depreciation ndash Disclose

bull Methods ndash Silent SLM WDV Annuity Sum of theyears digits Units of production

bull Max Life ndash 60 years (building other than factory buildingwith RCC frame)

Componentizationhellip

Part Bhellip

bull Min Life ndash 3 years ndash End user devices viz desktops laptops pads

amp temporary structures

bull Componentization of assets Note 4 to Schedule

bull Useful life is for whole of the asset where cost of a part of the

asset is significant to total cost of the asset and useful life of that

part is different from the useful life then separate UL is

applicable for that part

Schedule II - UL

Part Chellip snippets

bull Plant amp Machinery ndash General (CPP ndash 25 years Others ndash 15

years)

bull PampM ndash Special

bull Motor Vehicles ndash 10 years

bull Hire Vehicles ndash 6 years

SCHEME OF THE ACT

470Sections

29 Chapters7 Schedules

A very substantial part of the Act is in the form of ruleswhich are being prescribed separately

658Sections

13 Parts15Schedules

1 Accounting Standards

2 Associate Company

3 Auditing Standards

4 Authorised Capital

5 Books of Accounts

6 Called up capital

7 Charge

8 Chartered Accountant

9 Chief Executive Officer

10 Chief Financial Officer

11 Company Limited By Guarantee

12 Company Limited by Shares

13 Company Liquidator

14 Contributory

15 Control

16 Cost Accountant

17 Deposit

18 Expert

19 Financial Institution

20 Financial Statement

21 Foreign Company

22 Free Reserves

23 Global Depository Receipts

24 Independent Director

25 Indian Depository Receipt

26 Interested Director

27 Issued Capital

28 Key Managerial Personnel

29 Notification

30 Official Liquidator

31 One Person Company

32 Ordinary or Special Resolution

33 Postal Ballot

34 Promoter

35 Public Financial Institution

36 Register of Companies

37 Related Party

38 Remuneration

39 Serious Fraud InvestigationOffice

40 Small Company

41 Subscribed capital

42 Sweat Equity Shares

43 Turnover

44 Unlimited Company

45 Voting Right

46 Whole Time Director

983118983141983159 983108983141983142983145983150983145983156983145983151983150983155 983145983150983156983154983151983140983157983139983141983140 983145983150 983123983141983139983156983145983151983150 983090983098983085

7212019 Companies act Audit and accountspdf

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4

bull 2(18) ldquoChief Executive Officerrdquo means an officer of a company who

has been designated as such by it

bull 2(19) ldquoChief Financial Officerrdquo means a person appointed as a Chief

Financial Officer of a company

bull 2(66) ldquoprescribedrdquo means prescribed by rules made under this Act

983108983109983110983113983118983113983124983113983119983118983123 983127983112983113983107983112 983112983105983126983109 983106983109983109983118 983108983113983123983107983119983118983124983113983118983125983109983108

District Court

Industrial Company

Industrial Undertaking

Information memorandum

Issued generally

State Level Institution

Option in Securities

Operating Agency

Public Holiday

Share with Differential Rights

Sick Industrial Company

983108983109983110983113983118983113983124983113983119983118983123 983127983112983113983107983112 983112983105983126983109 983106983109983109983118 983108983113983123983107983119983118983124983113983118983125983109983108

District Court

Industrial Company

Industrial Undertaking

Information memorandum

Issued generally

State Level Institution

Option in Securities

Operating Agency

Public Holiday

Share with Differential Rights

Sick Industrial Company

ldquofinancial statementrdquo in relation to a company includesmdash

i a balance sheet as at the end of the financial year

ii a profit and loss account or in the case of a company carrying on any activity not

for profit an income and expenditure account for the financial year

iii cash flow statement for the financial year

iv a statement of changes in equity if applicable and

v any explanatory note annexed to or forming part of any document referred to in

sub-clause (i) to sub-clause (iv)

One Person Company Small Company Dormant Company ndash may not include Cash

Flow Statement

Financial Statement ndash 2(40)

Meaning ldquoFinancial yearrdquo in relation to any company or body corporate

means the period ending on the 31st day of March every year

Breathing time within a period of two years from such

commencement align its financial year as per the provisions of this

clause

Exception Incorporated on or after 1st January of a year then the period

ending on the 31st day of March if the following year

Financial Year ndash 2(41)

Relative ndash 2(77)

lsquolsquorelativersquorsquo with reference to any person means any one who is related

to another if mdash

i they are members of a Hindu Undivided Family

ii they are husband and wife or

iii one person is related to the other in such manner as may

be prescribed

List of Relatives as prescribed ndash only 8 only 8 only 8 only 8bull The Companies (Specification of definitions details) Rules 2014

bull Rule 4

bull A person shall be deemed to be the relative of another if he or she is related to another in the

following manner namely-

1 983110983137983156983144983141983154 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983110983137983156983144983141983154)

983090 983117983151983156983144983141983154 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983117983151983156983144983141983154)

983091 983123983151983150 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983123983151983150)

983092 983123983151983150991257983155 983127983145983142983141

983093 983108983137983157983143983144983156983141983154

983094 983108983137983157983143983144983156983141983154991257983155 983112983157983155983138983137983150983140

983095 983106983154983151983156983144983141983154 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983106983154983151983156983144983141983154)

983096 983123983145983155983156983141983154 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983123983145983155983156983141983154)

What happened to Step-Daughter Is she not a relative

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5

Expert - Section 2(38)

bull Definition - ldquoexpertrdquo includes an engineer a valuer a

chartered accountant a company secretary a cost accountant

and any other person who has the power or authority to issue a

certificate in pursuance of any law for the time being in force

Professional Indemnity Insurance ndash need of the hour

bull 247(4) ndash Serious liabilitybull refund the remuneration received by him to the company and

bull pay for damages to the company or to any other person for lossarising out of incorrect or misleading statements of particulars made

in his report

All companies having subsidiary(s) need to prepare consolidated

accounts

ldquoSubsidiaryrdquo includes associate and joint ventures

Rule 5 amp 6 ndash The Companies (Accounts) Rules 2014

Form AOC-1 The Statement containing salient features of the

FS of subsidiaries associate companies Joint ventures

Consolidation of Accounts 129(3)Consolidation of Accounts 129(3)Consolidation of Accounts 129(3)Consolidation of Accounts 129(3)

1956 Position

Consolidated is not mandated for any company

Only listing agreement requires consolidation for listed companies

having subsidiaries (clause 32 of Listing agreement and AS 21)

Chapter IX ndash Accounts of Companies

Section Particulars

128 Books of Account etc to be kept by company

129 Financial Statement

130 Re-opening of accounts on courtrsquos or tribunalrsquos orders

131 Voluntary revision of financial statements or Boardrsquos Report

132 Constitution of National Financial Reporting Authority

133 Central Government to prescribe accounting standards

134 Financial statement Boardrsquos Report etc

135 Corporate Social Responsibility

136 Right of member to copies of audited financial statement

137 Copy of financial statement to be filed with registrar

138 Internal Audit

ldquobook and paperrdquoand ldquobook or paperrdquo include

Books of account

Deeds

Vouchers

Writings

Documents

Minutes and registers maintained on paper or in electronic form

book and paper and book or paper- 2(12)

ldquobooks of accountrdquo includes records maintained in respect of mdash

1 a ll sums of money received and expended by a company and matters inrelation to which the receipts and expenditure take place

2 all sales and purchases of goods and services by the company

3 the assets and liabilities of the company and

4 the items of cost as may be prescribed under section 148 in the case of acompany which belongs to any class of companies specified under that

section

Refer us 209(1) of The Companies Act 1956

Books of Account - 2(13)

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6

Transitional provisions with respect to

Accounting Standards

bull The Companies (Accounts) Rules 2014

bull Rule 7

bull ICAI ndash AS continues as on date Standards as specified under companies

act 1956 shall be deemed to be the accounting standards until accounting

standards are specified by central government us 133

bull NACAS as of now NFRA later Till NFRA is constituted us 132 the central

government may prescribe the accounting standard or any addendum as

recommended by ICAI in consultation with and after examination of

recommendations made by NACAS constituted us 210A of companies Act

1956

NACAS National Advisory Committee on Accounting Standards

E-Mode ndash Rule 3

bull The Companies (Accounts) Rules 2014

bull Books of Accounts ndash Accessible (in India) Complete unaltered

bull C I A ndash Principles of Information Security but C is missing ndash only IampA is

addressed in rule

bull Rule 3(6) The company shall intimate to the registrar on an annual

basis at the time of filing of financial statement

a Name of the service provider

b The internet protocol address of service provider

c The location of the service provider (wherever applicable)

d Where the books of account and other books and papers are maintained on cloud

such address (physical) as provided by the service provider

E-Mode

bull Financial Statements ndash Section 136 ndash (Right of members to copies of audited

financial statements)

bull 21 days Notice to be sent

bull Along with a copy of the financial statements including consolidated

financial statements if any auditorrsquos report and every other documentrequired by law to be annexed or attached to the financial statements

bull To be Hosted in Website ndash Listed Company (as per Act)

E-Mode

bull The Companies (Accounts) Rules 2014

bull Rule 11 May be sent in e-mode ndash

bull All listed companies and all public companies having Net-worth gt 1 Cr amp

Turnover gt 10 Cr ndash the financial statements may be sent ndash

a By electronic mode to such members whose shareholding is in de-mat form and

whose email ids are registered with depository for communication purposes

b Where shareholding is held otherwise than by dematerialized format to such

members who have positively consented in writing for receiving by electronic mode

and

c By dispatch of physical copies through any recognized mode of delivery as specified

us 20

Boardrsquos Report shall also contain

bull The Companies (Accounts) Rules 2014

bull Rule 8 (5) Boardrsquos Report shall also contain

i the financial summary or highlights

ii the change in the nature of business if any

i ii th e details of directors or key managerial personnel who were appointed or have

resigned during the year

iv the names of companies which have become or ceased to be its Subsidiaries joint

ventures or associate companies during the year

bull The Companies (Accounts) Rules 2014

bull Rule 8 (5) Boardrsquos Report shall also contain

(v) the details relating to deposits covered under Chapter V of the Act-

(a) accepted during the year

(b) remained unpaid or unclaimed as at the end of the year

(c) whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so

number of such cases an d the total amount involved-

ndash (i) at the beginning of the year

ndash (ii) maximum during the year

ndash (iii) at the end of the year

(vi) the details of deposits which are not in compliance with the requirements of Chapter V of

the Act

(vii) the details of significant and material orders passed by the r egulators or courts or tribunals

impacting the going concern status and companyrsquos operations in future

(viii) the details in respect of adequacy of internal financial controls with reference to the

Financial Statements

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7

All companies including private companies who are meeting

eligibility criteria (NW ge 500 cr Turnover ge 1000 cr NP ge 5 cr)

are required to constitute a CSR committee consisting of at

least 3 directors out of which 1 must be ID and spend at least

2 of average NP on CSR activities

Corporate Social Responsibility 135Corporate Social Responsibility 135Corporate Social Responsibility 135Corporate Social Responsibility 135

1956 Position

No requirement to spend on CSR activties

CSR ndash Sec 135 amp CSR Rules

bull Net Profit ndash PBT

bull Tax treatment of CSR in accordance with proposed notification (beingstatutory expenditure ndash should be tax deductible) -

bull Professional Opportunity ndash Company Setup Trust Section 8 company Society

bull Other Trusts ndash minimum 3 year track record ndash CEO of IICA ndash DirectorGeneral Mr Bhaskar Chatterjee ndash Accreditation to NGOs ndash Govt Ratingfor NPOs ndash Partnering with ldquo Tata institute of social sciencesrdquo

bull CSR Index ndash BSE amp IICA ndash To Develop

bull Min 8000 eligible companies

bull Min Rs 12000 crores pay-off

138 - Internal Audit

bull Welcome move ndash Professional opportunity ndash Mandatory IA for listed amp Public

companies

bull CA CMA Board nominated professional

bull Rule is silent ndash Board AC to formulate - Scope Functioning periodicity

amp methodology in consultation with IA

bull Internal Auditor may or may not be

an employee of the company

bull CA means a CA whether engaged in

practice or not

Rule 13

The Companies (Accounts) Rules 2014 (all limits in preceding FY)

983110983151983148983148983151983159983145983150983143 983139983151983149983152983137983150983145983141983155 983156983151 983137983152983152983151983145983150983156 983113983150983156983141983154983150983137983148 983105983157983140983145983156983151983154 983149983137983150983140983137983156983151983154983145983148983161

983159983145983156983144983145983150 983094 983149983151983150983156983144983155 983151983142 983139983151983149983149983141983150983139983141983149983141983150983156 983151983142 983155983141983139983156983145983151983150

o Listed company

o Unlisted public company

bull Paid-up capital ge 50 crores

bull Turnover ge 200 crores

bull Os Loans or borrowings ge 100 crores

bull Os Deposits ge 25 crores

o Private Company

bull Turnover ge 200 crores

bull Os Loans or borrowings ge 100 crores (from banks or PFIs)

Rule 13(1) To appoint an internal auditor or a firm of internal auditors

NFRA

National Financial Reporting Authority

bull To be constituted by a notification of the Central Government

bull It shall consist of a Chairman (to be appointed by CG) and other members not

exceeding 15 in number

bull Chairperson and members shall make a declaration to the Central Government

regarding no conflict of interest or lack of independence in respect of his or

their appointment

bull Chairperson and members who are in full-time employment with NFRA 983155983144983137983148983148 983150983151983156

983138983141 983137983155983155983151983139983145983137983156983141983140 983159983145983156983144 983137983150983161 983137983157983140983145983156 983142983145983154983149 (including related consultancy firms) during the

course of their appointment and two years after ceasing to hold such

appointment

Constitution of NFRA

bull Yet to constitute by notification ndash Still in Draft Rules stage

bull Role of NFRA 132(2)

1 make recommendations to the Central Government on the formulation and laying

down of accounting and auditing policies and standards for adoption by

companies or class of companies or their auditors as the case may be

2 monitor and enforce the compliance with accounting standards and auditing

standards in such manner as may be prescribed

3 oversee the quality of service of the professions associated with ensuring

compliance with such standards and suggest measures required for

improvement in quality of service and such other related matters as may be

prescribed and

4 perform such other functions relating to clauses (a) (b) and (c) as may be

prescribed

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29-05-2014

8

Powers of NFRA

bull Powers of NFRA 132(4)

ndash have the power to investigate either suo motu or on a

reference made to it by the Central Government

ndash imposing penalty (5 Lakh 10 Lakhs)

ndash debarring the member or the firm from engaging himself or

itself from practice

Composition of

QRB

983124983144983141 983139983157983154983154983141983150983156 983139983151983149983152983151983155983145983156983145983151983150 983151983142 983156983144983141 983106983151983137983154983140 983139983151983150983155983145983155983156983155 983151983142 983156983144983141 983142983151983148983148983151983159983145983150983143983098983085

983118983151983149983145983150983141983141983155 983151983142 983156983144983141 983107983141983150983156983154983137983148 983111983151983158983141983154983150983149983141983150983156

1 983117983154 983117 983107 983114983151983155983144983145 983113983122983123 (983122983141983156983140) 983110983151983154983149983141983154 983107983144983137983145983154983149983137983150 983107983141983150983156983154983137983148 983106983151983137983154983140 983151983142 983108983145983154983141983139983156 983124983137983160983141983155 983117983145983150983145983155983156983154983161 983151983142 983110983145983150983137983150983139983141 983111983151983158983141983154983150983149983141983150983156 983151983142 983113983150983140983145983137 983118983119983113983108983105991251 983107983144983137983145983154983152983141983154983155983151983150 (983159983141983142 2162012)

2 983117983154 983120 983117983157983154983137983148983145 983117983151983144983137983150983137 983122983137983151 983112983161983140983141983154983137983138983137983140983085 983117983141983149983138983141983154 (983159983141983142 132014)3 983117983154 983117983137983150983151983146 983115983157983149983137983154 983113983105983123 983114983151983145983150983156 983123983141983139983154983141983156983137983154983161 983117983145983150983145983155983156983154983161 983151983142 983107983151983154983152983151983154983137983156983141 983105983142983142983137983145983154983155 983111983151983158983141983154983150983149983141983150983156 983151983142 983113983150983140983145983137 983118983141983159 983108983141983148983144983145 991251983117983141983149983138983141983154 (983159983141983142

1492011)4 983117983154 983126 983123 983123983157983150983140983137983154983141983155983137983150 983107983144983145983141983142 983111983141983150983141983154983137983148 983117983137983150983137983143983141983154 983123983141983139983157983154983145983156983145983141983155 983137983150983140 983109983160983139983144983137983150983143983141 983106983151983137983154983140 983151983142 983113983150983140983145983137 983117983157983149983138983137983145 991251983117983141983149983138983141983154 (983159983141983142 5112012)5 983117983154 983111983137983157983156983137983149 983111983157983144983137 983108983145983154983141983139983156983151983154 983111983141983150983141983154983137983148 (983107983151983149983149983141983154983139983145983137983148983085983113) 983119983142983142983145983139983141 983151983142 983156983144983141 983107983151983149983152983156983154983151983148983148983141983154 amp 983105983157983140983145983156983151983154 983111983141983150983141983154983137983148 983151983142 983113983150983140983145983137 983118983141983159 983108983141983148983144983145 991251 983117983141983149983138983141983154

(983159983141983142 1262012)

983118983151983149983145983150983141983141983155 983151983142 983156983144983141 983107983151983157983150983139983145983148 983151983142 983156983144983141 983113983107983105983113 1 983107983105 983115 983122983137983143983144983157 983120983154983141983155983145983140983141983150983156 983113983107983105983113 983106983137983150983143983137983148983157983154983157 991251 983117983141983149983138983141983154 (983159983141983142 132014)2 983107983105 983117983137983150983151983146 983110983137983140983150983145983155 983126983145983139983141983085983120983154983141983155983145983140983141983150983156 983113983107983105983113 983113983150983140983151983154983141 991251 983117983141983149983138983141983154 (983159983141983142 132014)3 983107983105 983123983157983138983151983140983144 983115 983105983143983154983137983159983137983148 983113983149983149983141983140983145983137983156983141 983120983137983155983156 983120983154983141983155983145983140983141983150983156 983113983107983105983113 983115983151983148983147983137983156983137 991251 983117983141983149983138983141983154 (983159983141983142 132014)4 983107983105 983122983137983146983147983157983149983137983154 983123 983105983140983157983147983145983137 983117983157983149983138983137983145 991251 983117983141983149983138983141983154 (983159983141983142 132014)5 983107983105 983107983144983137983154983137983150983146983151983156 983123983145983150983143983144 983118983137983150983140983137 983118983141983159 983108983141983148983144983145 991251 983117983141983149983138983141983154 (983159983141983142 132014)

983123983152983141983139983145983137983148 983113983150983158983145983156983141983141983155 1 983117983154 983122 983115 983120983137983150983140983137 983111983141983150983141983154983137983148 983117983137983150983137983143983141983154 983122983141983155983141983154983158983141 983106983137983150983147 983151983142 983113983150983140983145983137 983117983157983149983138983137983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831412 983117983154 983120983154983145983156983144983158983145 983112983137983148983140983141983137 983120983137983155983156 983107983151983157983150983139983145983148 983117983141983149983138983141983154 983113983107983105983113 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831413 983117983154 983124 983115983137983154983156983144983145983147983141983161983137983150 983123983141983139983154983141983156983137983154983161 983113983107983105983113 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831414 983117983154983155 983122983141983150983157983147983137 983115983157983149983137983154 983113983105983123 983114983151983145983150983156 983123983141983139983154983141983156983137983154983161 983117983145983150983145983155983156983154983161 983151983142 983107983151983154983152983151983154983137983156983141 983105983142983142983137983145983154983155 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 983145983150983158983145983156983141983141

983123983141983139983154983141983137983156983154983161 983156983151 983156983144983141 9831069831519831379831549831401 983117983154 983117983151983144983145983156 983106983137983145983146983137983148

Financial Review and Reporting Board

Chairman CA Nilesh Vikamsey

Peer Review Board

Chairman CA Naveen N D Guptha

Revision of FS or BR ndash 131

bull ldquoIf it appears FS do not comply with section 129rdquo

bull Revision of any of the 3 preceding FY

bull Approval of tribunal with notice to IT department

bull Tribunal will issue notice amp hear auditor (Audit Working Papers ndashnecessary)

bull Carry out audit procedures necessary to changed circumstances ndashremuneration please ndash [us 142 to be fixed in GM]

bull AS 5 ndash Prior Period Items AS 4 ndash Events Occurring after BS date AS 7 ndash Construction Contracts AS 22 ndash Accounting for Taxes on Income

bull Only one revision allowed unlike gt 1 revision a llowed under IT act

Chapter X ndash Audit amp Auditors

Section Particulars

139 Appointment of auditors

140 Removal resignation of auditor and giving of special notice

141 Eligibility qualifications and disqualifications of auditors

142 Remuneration of auditors

143 Powers and duties of auditors and auditing standards

144 Auditors not to render certain services

145 Auditors to sign audit reports etc

146 Auditors to attend general meeting

147 Punishment for contravention

148 CG to specify audit of items of cost in respect of certain companies

Appointment of Auditors

bull India believes audit rotation is a positive step

bull Rule 6 ndash The Companies (Audit and Auditors) Rules 2014

bull 3 year time frame for implementation ndash Maximum number of

consecutive years for which he may be appointed in the same

company (including the Transitional Period) 3 to 4 years for Individual

auditor 3 to 9 years in case of audit firm

bull Firm Rotation ndash Mandatory

bull Partner Rotation ndash Optional Voluntary ndash Members may resolve to

provide for ndash Section 139(3)

7212019 Companies act Audit and accountspdf

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29-05-2014

9

Applicability of Rotation

bull Section 139(2)

bull Rule 5 The companies (Audit and Auditors) Rules 2014

bull Class of Companies excludes OPC and Small Companies

bull Includes

bull All unlisted public companies having paid up capital of 10 croresor more

bull All private limited companies having paid up capital of 20 croresor more

bull Public borrowings from FI banks public deposits of 50 croresof more

bull 143(12) - Notwithstanding anything contained in this section if an

auditor of a company in the course of the performance of his duties

as auditor has reason to believe that an offence involving fraud is

being or has been committed against the company by officers or

employees of the company he shall immediately report the matter

to the Central Government within such time and in such manner as

may be prescribed

Fraud Reporting ndash Section 143(12)

Rule 13 ndash Report to CG

bull The companies (Audit and Auditors) Rules 2014

bull Fraud is being or has been committed against the company by officers

or employees of the company

bull Report the matter to the CG within 60 days following a procedure

bull Forward his report to board AC (immediately) ndash seeking their reply

within 45 days

bull On receipt of reply forward his report and the reply or observations of

board AC along with his comments to CG within 15 days

bull No reply from Board AC ndash even then forward to CG

Rule 13 ndash Report to CG

bull To whom

bull The Secretary Ministry of Corporate Affairs in a sealed cover by

Registered Post with ack due or Speed Post followed by an e-mail in

confirmation of the same

bull The report shall be on letter head of the auditor containing address e-

mail address and contact number and be signed by the auditor with his

seal and shall indicate his MNo

bull Form ADT-4

bull Your Attention Please This shall apply mutatis-mutandis to cost

accountant in practice and secretarial auditor

Auditors to attend General Meeting

bull 231 (Old) ndash Entitled to attend ndash optional attendance

bull 146 ndash attend either by himself or through his authorised

representative who shall also be qualified to be an auditor

any general meeting and shall have right to be heard at such meeting

on any part of the business which concerns him as the auditor ndash

Mandatory attendance

143 - Powers amp duties of Auditors and

Auditing Standards

bull 143(1)(f) - Share Capital SAMPA ndash Cash COTC where it is stated in thebooks and documents of the company that any shares have been allotted for cashwhether cash has actually been received in respect of such allotment and

if no cash has actually been so received whether the position as stated in the

account books and the balance sheet is correct regular and not

misleading

bull 143(3) ndashThe Auditorrsquos report shall also state (a) to (j) ndash SA 700 705 706 may gofor revision

bull 143(4) ndash Where any of the matters required to be included in the audit report underthis section is answered in the negative or with a qualification the report shall

state the reasons therefor

bull 143(9) - Every auditor shall comply with the auditing standards ndash 58 so

far pronounced by ICAI from SA 200 to SA 4410 ndash SA SQC SIA

7212019 Companies act Audit and accountspdf

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29-05-2014

10

Powers amp duties of Auditors and Auditing

Standards

bull 143 (14) -The provisions of this section shall mutatismutandis apply tomdash

ndash (a) the cost accountant in practice conducting cost audit

under section 148 or

ndash (b) the company secretary in practice conducting secretarial

audit under section 204

141 - Eligibility Qualifications amp

Disqualifications of Auditors

bull Disqualification ndash disappointment

bull Qualification ndash Innovation termination

bull Business Relationship ndash 141(3)(e)

bull Convicted by court ndash 141(3)(h)

bull 20 Companies Limit ndash as per 141(3)(g)

bull 1 Lakh ndash Lakshman Rekha

bull Any other form of entity engaged in 144 services

Eligibility Qualifications amp

Disqualifications of Auditors

ICAI Council Guidelines ndash 2008

For the above purpose the ldquospecified number of audit assignmentsrdquo means ndash

(a) in the case of a Chartered Accountant in practice or a proprietary firm of

Chartered Accountant thirty audit assignments whether in respect of

private Companies or other Companies

(b) in the case of Chartered Accountants in practice thirty audit assignments

per partner in the firm whether in respect of private Companies or other

Companies

Provided that out of such ldquospecified number of audit assignments the

number of audit assignments of public Companies each of which has a paid-up

share capital of rupees twenty-five lakhs or more shall not exceed ten

Appointment of Auditors

bull Appointment Re-appointment are known used terms

bull Retirement Rotation Ratification 5 year break or cooling period ndash

is new eligibility criteria

bull Common Partners same network of audit firms trade mark or Brand

bull Recently US house of representatives approved a Bill that prohibited

the US regulator from mandating audit rotation

bull 147(3) ndash Serious liability

bull refund the remuneration received by him to the company and

bull pay for damages to the company statutory bodies or authorities or to anyother persons for loss arising out of incorrect or misleading statements ofparticulars made in his audit report ndash [Caution Bankers will be First]

bull 147(1) ndash Contravention liable for prosecution ndash 1 year (officer)

bull 147(2) ndash Contravention liable for Fine (25K ndash 5L) ndash prosecution 1111

year amp Fine (1L ndash 25L) (Auditor) ndash see Proviso to 147(2)

bull To provide for insurance cost in the books of accounts of professional firms ndash the

best insurance is Professional Integrity

bull 147 use the word Auditor (includes CMACS) ndash yes ndash refer 143(14)

bull Council Guidelines No1-CA(7)022008 dated 8th August 2008 -

GUIDELINES FOR THE MEMBERS OF ICAI

bull New provision

bull 144 ndash Restriction ndash One side | Independence ndash Other Side

983109983160983152983148983137983150983137983156983145983151983150983098 983124 he term ldquodirectly or indirectlyrdquo shall include rendering of services by the auditormdash

1 in case of auditor being an individual either himself or through his relative or any other person

connected or associated with such individual or through any other entity whatsoever in

which such individual has significant influence or control or whose name or trade mark orbrand is used by such individual

2 in case of auditor being a firm either itself or through any of its partners or through its parent

subsidiary or associate entity or through any other entity whatsoever in which the firm or

any partner of the firm has significant influence or control or whose name or trade mark orbrand is used by the firm or any of its partners

Auditor not to render certain

services

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11

a) accounting and book keeping services

b) internal audit

c) design and implementation of any financial information system

d) actuarial services

e) investment advisory services

f) investment banking services

g) rendering of outsourced financial services

h) management services and

i) any other kind of services as may be prescribed

Statutory Warning Say no to these services ndash Section 144

983107983144983137983152983156983141983154 983113983128 983085 983105983152983152983151983145983150983156983149983141983150983156 983137983155 983123983156983137983156983157983156983151983154983161 983137983157983140983145983156983151983154

983080983141983160983156983154983137983139983156 983142983154983151983149 983113983107983105983113 983107983151983157983150983139983145983148 983111983157983145983140983141983148983145983150983141983155 983085 983090983088983088983096983081

bull A member of the Institute in practice shall not accept the appointment as statutory

auditor of Public Sector Undertaking(s) Government Company(ies)Listed

Company(ies) and other Public Company(ies) having turnover of Rs 50 crores

or more in a year where he accepts any other work(s) or assignment(s) or

service(s) in regard to the same Undertaking(s) Company(ies) on a remuneration which in

total exceeds the fee payable for carrying out the statutory audit of the same

Undertakingcompany

bull In regard to taking up other work(s) or service(s) or assignment(s) of the

undertakingcompany referred to above it shall be open to such associate concern or

corporate body to render such work(s) or service(s) or assignment(s) so long as

aggregate remuneration for such other work(s) or service(s) or assignment(s)

payable to the statutory auditors together with fees payable to its associate

concern(s) or corporate body(ies) dodoes not exceed the aggregate of fee

payable for carrying out the statutory audit

983107983105983086 983111983119983120983105983116 983115983122983113983123983112983118983105 983122983105983114983125 | FCA AICWA ACS PGDOR PGDFM DISA (ICA) MPhil

Tax Partner Ms K Gopal Rao amp Co Chartered Accountants Chennai

Member ndash Southern India Regional Council of The Institute of Chartered Accountants of India

Email gkricaiorg | Mobile 98400 63269

7212019 Companies act Audit and accountspdf

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4

bull 2(18) ldquoChief Executive Officerrdquo means an officer of a company who

has been designated as such by it

bull 2(19) ldquoChief Financial Officerrdquo means a person appointed as a Chief

Financial Officer of a company

bull 2(66) ldquoprescribedrdquo means prescribed by rules made under this Act

983108983109983110983113983118983113983124983113983119983118983123 983127983112983113983107983112 983112983105983126983109 983106983109983109983118 983108983113983123983107983119983118983124983113983118983125983109983108

District Court

Industrial Company

Industrial Undertaking

Information memorandum

Issued generally

State Level Institution

Option in Securities

Operating Agency

Public Holiday

Share with Differential Rights

Sick Industrial Company

983108983109983110983113983118983113983124983113983119983118983123 983127983112983113983107983112 983112983105983126983109 983106983109983109983118 983108983113983123983107983119983118983124983113983118983125983109983108

District Court

Industrial Company

Industrial Undertaking

Information memorandum

Issued generally

State Level Institution

Option in Securities

Operating Agency

Public Holiday

Share with Differential Rights

Sick Industrial Company

ldquofinancial statementrdquo in relation to a company includesmdash

i a balance sheet as at the end of the financial year

ii a profit and loss account or in the case of a company carrying on any activity not

for profit an income and expenditure account for the financial year

iii cash flow statement for the financial year

iv a statement of changes in equity if applicable and

v any explanatory note annexed to or forming part of any document referred to in

sub-clause (i) to sub-clause (iv)

One Person Company Small Company Dormant Company ndash may not include Cash

Flow Statement

Financial Statement ndash 2(40)

Meaning ldquoFinancial yearrdquo in relation to any company or body corporate

means the period ending on the 31st day of March every year

Breathing time within a period of two years from such

commencement align its financial year as per the provisions of this

clause

Exception Incorporated on or after 1st January of a year then the period

ending on the 31st day of March if the following year

Financial Year ndash 2(41)

Relative ndash 2(77)

lsquolsquorelativersquorsquo with reference to any person means any one who is related

to another if mdash

i they are members of a Hindu Undivided Family

ii they are husband and wife or

iii one person is related to the other in such manner as may

be prescribed

List of Relatives as prescribed ndash only 8 only 8 only 8 only 8bull The Companies (Specification of definitions details) Rules 2014

bull Rule 4

bull A person shall be deemed to be the relative of another if he or she is related to another in the

following manner namely-

1 983110983137983156983144983141983154 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983110983137983156983144983141983154)

983090 983117983151983156983144983141983154 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983117983151983156983144983141983154)

983091 983123983151983150 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983123983151983150)

983092 983123983151983150991257983155 983127983145983142983141

983093 983108983137983157983143983144983156983141983154

983094 983108983137983157983143983144983156983141983154991257983155 983112983157983155983138983137983150983140

983095 983106983154983151983156983144983141983154 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983106983154983151983156983144983141983154)

983096 983123983145983155983156983141983154 (983145983150983139983148983157983140983145983150983143 983123983156983141983152983085983123983145983155983156983141983154)

What happened to Step-Daughter Is she not a relative

7212019 Companies act Audit and accountspdf

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5

Expert - Section 2(38)

bull Definition - ldquoexpertrdquo includes an engineer a valuer a

chartered accountant a company secretary a cost accountant

and any other person who has the power or authority to issue a

certificate in pursuance of any law for the time being in force

Professional Indemnity Insurance ndash need of the hour

bull 247(4) ndash Serious liabilitybull refund the remuneration received by him to the company and

bull pay for damages to the company or to any other person for lossarising out of incorrect or misleading statements of particulars made

in his report

All companies having subsidiary(s) need to prepare consolidated

accounts

ldquoSubsidiaryrdquo includes associate and joint ventures

Rule 5 amp 6 ndash The Companies (Accounts) Rules 2014

Form AOC-1 The Statement containing salient features of the

FS of subsidiaries associate companies Joint ventures

Consolidation of Accounts 129(3)Consolidation of Accounts 129(3)Consolidation of Accounts 129(3)Consolidation of Accounts 129(3)

1956 Position

Consolidated is not mandated for any company

Only listing agreement requires consolidation for listed companies

having subsidiaries (clause 32 of Listing agreement and AS 21)

Chapter IX ndash Accounts of Companies

Section Particulars

128 Books of Account etc to be kept by company

129 Financial Statement

130 Re-opening of accounts on courtrsquos or tribunalrsquos orders

131 Voluntary revision of financial statements or Boardrsquos Report

132 Constitution of National Financial Reporting Authority

133 Central Government to prescribe accounting standards

134 Financial statement Boardrsquos Report etc

135 Corporate Social Responsibility

136 Right of member to copies of audited financial statement

137 Copy of financial statement to be filed with registrar

138 Internal Audit

ldquobook and paperrdquoand ldquobook or paperrdquo include

Books of account

Deeds

Vouchers

Writings

Documents

Minutes and registers maintained on paper or in electronic form

book and paper and book or paper- 2(12)

ldquobooks of accountrdquo includes records maintained in respect of mdash

1 a ll sums of money received and expended by a company and matters inrelation to which the receipts and expenditure take place

2 all sales and purchases of goods and services by the company

3 the assets and liabilities of the company and

4 the items of cost as may be prescribed under section 148 in the case of acompany which belongs to any class of companies specified under that

section

Refer us 209(1) of The Companies Act 1956

Books of Account - 2(13)

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29-05-2014

6

Transitional provisions with respect to

Accounting Standards

bull The Companies (Accounts) Rules 2014

bull Rule 7

bull ICAI ndash AS continues as on date Standards as specified under companies

act 1956 shall be deemed to be the accounting standards until accounting

standards are specified by central government us 133

bull NACAS as of now NFRA later Till NFRA is constituted us 132 the central

government may prescribe the accounting standard or any addendum as

recommended by ICAI in consultation with and after examination of

recommendations made by NACAS constituted us 210A of companies Act

1956

NACAS National Advisory Committee on Accounting Standards

E-Mode ndash Rule 3

bull The Companies (Accounts) Rules 2014

bull Books of Accounts ndash Accessible (in India) Complete unaltered

bull C I A ndash Principles of Information Security but C is missing ndash only IampA is

addressed in rule

bull Rule 3(6) The company shall intimate to the registrar on an annual

basis at the time of filing of financial statement

a Name of the service provider

b The internet protocol address of service provider

c The location of the service provider (wherever applicable)

d Where the books of account and other books and papers are maintained on cloud

such address (physical) as provided by the service provider

E-Mode

bull Financial Statements ndash Section 136 ndash (Right of members to copies of audited

financial statements)

bull 21 days Notice to be sent

bull Along with a copy of the financial statements including consolidated

financial statements if any auditorrsquos report and every other documentrequired by law to be annexed or attached to the financial statements

bull To be Hosted in Website ndash Listed Company (as per Act)

E-Mode

bull The Companies (Accounts) Rules 2014

bull Rule 11 May be sent in e-mode ndash

bull All listed companies and all public companies having Net-worth gt 1 Cr amp

Turnover gt 10 Cr ndash the financial statements may be sent ndash

a By electronic mode to such members whose shareholding is in de-mat form and

whose email ids are registered with depository for communication purposes

b Where shareholding is held otherwise than by dematerialized format to such

members who have positively consented in writing for receiving by electronic mode

and

c By dispatch of physical copies through any recognized mode of delivery as specified

us 20

Boardrsquos Report shall also contain

bull The Companies (Accounts) Rules 2014

bull Rule 8 (5) Boardrsquos Report shall also contain

i the financial summary or highlights

ii the change in the nature of business if any

i ii th e details of directors or key managerial personnel who were appointed or have

resigned during the year

iv the names of companies which have become or ceased to be its Subsidiaries joint

ventures or associate companies during the year

bull The Companies (Accounts) Rules 2014

bull Rule 8 (5) Boardrsquos Report shall also contain

(v) the details relating to deposits covered under Chapter V of the Act-

(a) accepted during the year

(b) remained unpaid or unclaimed as at the end of the year

(c) whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so

number of such cases an d the total amount involved-

ndash (i) at the beginning of the year

ndash (ii) maximum during the year

ndash (iii) at the end of the year

(vi) the details of deposits which are not in compliance with the requirements of Chapter V of

the Act

(vii) the details of significant and material orders passed by the r egulators or courts or tribunals

impacting the going concern status and companyrsquos operations in future

(viii) the details in respect of adequacy of internal financial controls with reference to the

Financial Statements

7212019 Companies act Audit and accountspdf

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29-05-2014

7

All companies including private companies who are meeting

eligibility criteria (NW ge 500 cr Turnover ge 1000 cr NP ge 5 cr)

are required to constitute a CSR committee consisting of at

least 3 directors out of which 1 must be ID and spend at least

2 of average NP on CSR activities

Corporate Social Responsibility 135Corporate Social Responsibility 135Corporate Social Responsibility 135Corporate Social Responsibility 135

1956 Position

No requirement to spend on CSR activties

CSR ndash Sec 135 amp CSR Rules

bull Net Profit ndash PBT

bull Tax treatment of CSR in accordance with proposed notification (beingstatutory expenditure ndash should be tax deductible) -

bull Professional Opportunity ndash Company Setup Trust Section 8 company Society

bull Other Trusts ndash minimum 3 year track record ndash CEO of IICA ndash DirectorGeneral Mr Bhaskar Chatterjee ndash Accreditation to NGOs ndash Govt Ratingfor NPOs ndash Partnering with ldquo Tata institute of social sciencesrdquo

bull CSR Index ndash BSE amp IICA ndash To Develop

bull Min 8000 eligible companies

bull Min Rs 12000 crores pay-off

138 - Internal Audit

bull Welcome move ndash Professional opportunity ndash Mandatory IA for listed amp Public

companies

bull CA CMA Board nominated professional

bull Rule is silent ndash Board AC to formulate - Scope Functioning periodicity

amp methodology in consultation with IA

bull Internal Auditor may or may not be

an employee of the company

bull CA means a CA whether engaged in

practice or not

Rule 13

The Companies (Accounts) Rules 2014 (all limits in preceding FY)

983110983151983148983148983151983159983145983150983143 983139983151983149983152983137983150983145983141983155 983156983151 983137983152983152983151983145983150983156 983113983150983156983141983154983150983137983148 983105983157983140983145983156983151983154 983149983137983150983140983137983156983151983154983145983148983161

983159983145983156983144983145983150 983094 983149983151983150983156983144983155 983151983142 983139983151983149983149983141983150983139983141983149983141983150983156 983151983142 983155983141983139983156983145983151983150

o Listed company

o Unlisted public company

bull Paid-up capital ge 50 crores

bull Turnover ge 200 crores

bull Os Loans or borrowings ge 100 crores

bull Os Deposits ge 25 crores

o Private Company

bull Turnover ge 200 crores

bull Os Loans or borrowings ge 100 crores (from banks or PFIs)

Rule 13(1) To appoint an internal auditor or a firm of internal auditors

NFRA

National Financial Reporting Authority

bull To be constituted by a notification of the Central Government

bull It shall consist of a Chairman (to be appointed by CG) and other members not

exceeding 15 in number

bull Chairperson and members shall make a declaration to the Central Government

regarding no conflict of interest or lack of independence in respect of his or

their appointment

bull Chairperson and members who are in full-time employment with NFRA 983155983144983137983148983148 983150983151983156

983138983141 983137983155983155983151983139983145983137983156983141983140 983159983145983156983144 983137983150983161 983137983157983140983145983156 983142983145983154983149 (including related consultancy firms) during the

course of their appointment and two years after ceasing to hold such

appointment

Constitution of NFRA

bull Yet to constitute by notification ndash Still in Draft Rules stage

bull Role of NFRA 132(2)

1 make recommendations to the Central Government on the formulation and laying

down of accounting and auditing policies and standards for adoption by

companies or class of companies or their auditors as the case may be

2 monitor and enforce the compliance with accounting standards and auditing

standards in such manner as may be prescribed

3 oversee the quality of service of the professions associated with ensuring

compliance with such standards and suggest measures required for

improvement in quality of service and such other related matters as may be

prescribed and

4 perform such other functions relating to clauses (a) (b) and (c) as may be

prescribed

7212019 Companies act Audit and accountspdf

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29-05-2014

8

Powers of NFRA

bull Powers of NFRA 132(4)

ndash have the power to investigate either suo motu or on a

reference made to it by the Central Government

ndash imposing penalty (5 Lakh 10 Lakhs)

ndash debarring the member or the firm from engaging himself or

itself from practice

Composition of

QRB

983124983144983141 983139983157983154983154983141983150983156 983139983151983149983152983151983155983145983156983145983151983150 983151983142 983156983144983141 983106983151983137983154983140 983139983151983150983155983145983155983156983155 983151983142 983156983144983141 983142983151983148983148983151983159983145983150983143983098983085

983118983151983149983145983150983141983141983155 983151983142 983156983144983141 983107983141983150983156983154983137983148 983111983151983158983141983154983150983149983141983150983156

1 983117983154 983117 983107 983114983151983155983144983145 983113983122983123 (983122983141983156983140) 983110983151983154983149983141983154 983107983144983137983145983154983149983137983150 983107983141983150983156983154983137983148 983106983151983137983154983140 983151983142 983108983145983154983141983139983156 983124983137983160983141983155 983117983145983150983145983155983156983154983161 983151983142 983110983145983150983137983150983139983141 983111983151983158983141983154983150983149983141983150983156 983151983142 983113983150983140983145983137 983118983119983113983108983105991251 983107983144983137983145983154983152983141983154983155983151983150 (983159983141983142 2162012)

2 983117983154 983120 983117983157983154983137983148983145 983117983151983144983137983150983137 983122983137983151 983112983161983140983141983154983137983138983137983140983085 983117983141983149983138983141983154 (983159983141983142 132014)3 983117983154 983117983137983150983151983146 983115983157983149983137983154 983113983105983123 983114983151983145983150983156 983123983141983139983154983141983156983137983154983161 983117983145983150983145983155983156983154983161 983151983142 983107983151983154983152983151983154983137983156983141 983105983142983142983137983145983154983155 983111983151983158983141983154983150983149983141983150983156 983151983142 983113983150983140983145983137 983118983141983159 983108983141983148983144983145 991251983117983141983149983138983141983154 (983159983141983142

1492011)4 983117983154 983126 983123 983123983157983150983140983137983154983141983155983137983150 983107983144983145983141983142 983111983141983150983141983154983137983148 983117983137983150983137983143983141983154 983123983141983139983157983154983145983156983145983141983155 983137983150983140 983109983160983139983144983137983150983143983141 983106983151983137983154983140 983151983142 983113983150983140983145983137 983117983157983149983138983137983145 991251983117983141983149983138983141983154 (983159983141983142 5112012)5 983117983154 983111983137983157983156983137983149 983111983157983144983137 983108983145983154983141983139983156983151983154 983111983141983150983141983154983137983148 (983107983151983149983149983141983154983139983145983137983148983085983113) 983119983142983142983145983139983141 983151983142 983156983144983141 983107983151983149983152983156983154983151983148983148983141983154 amp 983105983157983140983145983156983151983154 983111983141983150983141983154983137983148 983151983142 983113983150983140983145983137 983118983141983159 983108983141983148983144983145 991251 983117983141983149983138983141983154

(983159983141983142 1262012)

983118983151983149983145983150983141983141983155 983151983142 983156983144983141 983107983151983157983150983139983145983148 983151983142 983156983144983141 983113983107983105983113 1 983107983105 983115 983122983137983143983144983157 983120983154983141983155983145983140983141983150983156 983113983107983105983113 983106983137983150983143983137983148983157983154983157 991251 983117983141983149983138983141983154 (983159983141983142 132014)2 983107983105 983117983137983150983151983146 983110983137983140983150983145983155 983126983145983139983141983085983120983154983141983155983145983140983141983150983156 983113983107983105983113 983113983150983140983151983154983141 991251 983117983141983149983138983141983154 (983159983141983142 132014)3 983107983105 983123983157983138983151983140983144 983115 983105983143983154983137983159983137983148 983113983149983149983141983140983145983137983156983141 983120983137983155983156 983120983154983141983155983145983140983141983150983156 983113983107983105983113 983115983151983148983147983137983156983137 991251 983117983141983149983138983141983154 (983159983141983142 132014)4 983107983105 983122983137983146983147983157983149983137983154 983123 983105983140983157983147983145983137 983117983157983149983138983137983145 991251 983117983141983149983138983141983154 (983159983141983142 132014)5 983107983105 983107983144983137983154983137983150983146983151983156 983123983145983150983143983144 983118983137983150983140983137 983118983141983159 983108983141983148983144983145 991251 983117983141983149983138983141983154 (983159983141983142 132014)

983123983152983141983139983145983137983148 983113983150983158983145983156983141983141983155 1 983117983154 983122 983115 983120983137983150983140983137 983111983141983150983141983154983137983148 983117983137983150983137983143983141983154 983122983141983155983141983154983158983141 983106983137983150983147 983151983142 983113983150983140983145983137 983117983157983149983138983137983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831412 983117983154 983120983154983145983156983144983158983145 983112983137983148983140983141983137 983120983137983155983156 983107983151983157983150983139983145983148 983117983141983149983138983141983154 983113983107983105983113 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831413 983117983154 983124 983115983137983154983156983144983145983147983141983161983137983150 983123983141983139983154983141983156983137983154983161 983113983107983105983113 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831414 983117983154983155 983122983141983150983157983147983137 983115983157983149983137983154 983113983105983123 983114983151983145983150983156 983123983141983139983154983141983156983137983154983161 983117983145983150983145983155983156983154983161 983151983142 983107983151983154983152983151983154983137983156983141 983105983142983142983137983145983154983155 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 983145983150983158983145983156983141983141

983123983141983139983154983141983137983156983154983161 983156983151 983156983144983141 9831069831519831379831549831401 983117983154 983117983151983144983145983156 983106983137983145983146983137983148

Financial Review and Reporting Board

Chairman CA Nilesh Vikamsey

Peer Review Board

Chairman CA Naveen N D Guptha

Revision of FS or BR ndash 131

bull ldquoIf it appears FS do not comply with section 129rdquo

bull Revision of any of the 3 preceding FY

bull Approval of tribunal with notice to IT department

bull Tribunal will issue notice amp hear auditor (Audit Working Papers ndashnecessary)

bull Carry out audit procedures necessary to changed circumstances ndashremuneration please ndash [us 142 to be fixed in GM]

bull AS 5 ndash Prior Period Items AS 4 ndash Events Occurring after BS date AS 7 ndash Construction Contracts AS 22 ndash Accounting for Taxes on Income

bull Only one revision allowed unlike gt 1 revision a llowed under IT act

Chapter X ndash Audit amp Auditors

Section Particulars

139 Appointment of auditors

140 Removal resignation of auditor and giving of special notice

141 Eligibility qualifications and disqualifications of auditors

142 Remuneration of auditors

143 Powers and duties of auditors and auditing standards

144 Auditors not to render certain services

145 Auditors to sign audit reports etc

146 Auditors to attend general meeting

147 Punishment for contravention

148 CG to specify audit of items of cost in respect of certain companies

Appointment of Auditors

bull India believes audit rotation is a positive step

bull Rule 6 ndash The Companies (Audit and Auditors) Rules 2014

bull 3 year time frame for implementation ndash Maximum number of

consecutive years for which he may be appointed in the same

company (including the Transitional Period) 3 to 4 years for Individual

auditor 3 to 9 years in case of audit firm

bull Firm Rotation ndash Mandatory

bull Partner Rotation ndash Optional Voluntary ndash Members may resolve to

provide for ndash Section 139(3)

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9

Applicability of Rotation

bull Section 139(2)

bull Rule 5 The companies (Audit and Auditors) Rules 2014

bull Class of Companies excludes OPC and Small Companies

bull Includes

bull All unlisted public companies having paid up capital of 10 croresor more

bull All private limited companies having paid up capital of 20 croresor more

bull Public borrowings from FI banks public deposits of 50 croresof more

bull 143(12) - Notwithstanding anything contained in this section if an

auditor of a company in the course of the performance of his duties

as auditor has reason to believe that an offence involving fraud is

being or has been committed against the company by officers or

employees of the company he shall immediately report the matter

to the Central Government within such time and in such manner as

may be prescribed

Fraud Reporting ndash Section 143(12)

Rule 13 ndash Report to CG

bull The companies (Audit and Auditors) Rules 2014

bull Fraud is being or has been committed against the company by officers

or employees of the company

bull Report the matter to the CG within 60 days following a procedure

bull Forward his report to board AC (immediately) ndash seeking their reply

within 45 days

bull On receipt of reply forward his report and the reply or observations of

board AC along with his comments to CG within 15 days

bull No reply from Board AC ndash even then forward to CG

Rule 13 ndash Report to CG

bull To whom

bull The Secretary Ministry of Corporate Affairs in a sealed cover by

Registered Post with ack due or Speed Post followed by an e-mail in

confirmation of the same

bull The report shall be on letter head of the auditor containing address e-

mail address and contact number and be signed by the auditor with his

seal and shall indicate his MNo

bull Form ADT-4

bull Your Attention Please This shall apply mutatis-mutandis to cost

accountant in practice and secretarial auditor

Auditors to attend General Meeting

bull 231 (Old) ndash Entitled to attend ndash optional attendance

bull 146 ndash attend either by himself or through his authorised

representative who shall also be qualified to be an auditor

any general meeting and shall have right to be heard at such meeting

on any part of the business which concerns him as the auditor ndash

Mandatory attendance

143 - Powers amp duties of Auditors and

Auditing Standards

bull 143(1)(f) - Share Capital SAMPA ndash Cash COTC where it is stated in thebooks and documents of the company that any shares have been allotted for cashwhether cash has actually been received in respect of such allotment and

if no cash has actually been so received whether the position as stated in the

account books and the balance sheet is correct regular and not

misleading

bull 143(3) ndashThe Auditorrsquos report shall also state (a) to (j) ndash SA 700 705 706 may gofor revision

bull 143(4) ndash Where any of the matters required to be included in the audit report underthis section is answered in the negative or with a qualification the report shall

state the reasons therefor

bull 143(9) - Every auditor shall comply with the auditing standards ndash 58 so

far pronounced by ICAI from SA 200 to SA 4410 ndash SA SQC SIA

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10

Powers amp duties of Auditors and Auditing

Standards

bull 143 (14) -The provisions of this section shall mutatismutandis apply tomdash

ndash (a) the cost accountant in practice conducting cost audit

under section 148 or

ndash (b) the company secretary in practice conducting secretarial

audit under section 204

141 - Eligibility Qualifications amp

Disqualifications of Auditors

bull Disqualification ndash disappointment

bull Qualification ndash Innovation termination

bull Business Relationship ndash 141(3)(e)

bull Convicted by court ndash 141(3)(h)

bull 20 Companies Limit ndash as per 141(3)(g)

bull 1 Lakh ndash Lakshman Rekha

bull Any other form of entity engaged in 144 services

Eligibility Qualifications amp

Disqualifications of Auditors

ICAI Council Guidelines ndash 2008

For the above purpose the ldquospecified number of audit assignmentsrdquo means ndash

(a) in the case of a Chartered Accountant in practice or a proprietary firm of

Chartered Accountant thirty audit assignments whether in respect of

private Companies or other Companies

(b) in the case of Chartered Accountants in practice thirty audit assignments

per partner in the firm whether in respect of private Companies or other

Companies

Provided that out of such ldquospecified number of audit assignments the

number of audit assignments of public Companies each of which has a paid-up

share capital of rupees twenty-five lakhs or more shall not exceed ten

Appointment of Auditors

bull Appointment Re-appointment are known used terms

bull Retirement Rotation Ratification 5 year break or cooling period ndash

is new eligibility criteria

bull Common Partners same network of audit firms trade mark or Brand

bull Recently US house of representatives approved a Bill that prohibited

the US regulator from mandating audit rotation

bull 147(3) ndash Serious liability

bull refund the remuneration received by him to the company and

bull pay for damages to the company statutory bodies or authorities or to anyother persons for loss arising out of incorrect or misleading statements ofparticulars made in his audit report ndash [Caution Bankers will be First]

bull 147(1) ndash Contravention liable for prosecution ndash 1 year (officer)

bull 147(2) ndash Contravention liable for Fine (25K ndash 5L) ndash prosecution 1111

year amp Fine (1L ndash 25L) (Auditor) ndash see Proviso to 147(2)

bull To provide for insurance cost in the books of accounts of professional firms ndash the

best insurance is Professional Integrity

bull 147 use the word Auditor (includes CMACS) ndash yes ndash refer 143(14)

bull Council Guidelines No1-CA(7)022008 dated 8th August 2008 -

GUIDELINES FOR THE MEMBERS OF ICAI

bull New provision

bull 144 ndash Restriction ndash One side | Independence ndash Other Side

983109983160983152983148983137983150983137983156983145983151983150983098 983124 he term ldquodirectly or indirectlyrdquo shall include rendering of services by the auditormdash

1 in case of auditor being an individual either himself or through his relative or any other person

connected or associated with such individual or through any other entity whatsoever in

which such individual has significant influence or control or whose name or trade mark orbrand is used by such individual

2 in case of auditor being a firm either itself or through any of its partners or through its parent

subsidiary or associate entity or through any other entity whatsoever in which the firm or

any partner of the firm has significant influence or control or whose name or trade mark orbrand is used by the firm or any of its partners

Auditor not to render certain

services

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11

a) accounting and book keeping services

b) internal audit

c) design and implementation of any financial information system

d) actuarial services

e) investment advisory services

f) investment banking services

g) rendering of outsourced financial services

h) management services and

i) any other kind of services as may be prescribed

Statutory Warning Say no to these services ndash Section 144

983107983144983137983152983156983141983154 983113983128 983085 983105983152983152983151983145983150983156983149983141983150983156 983137983155 983123983156983137983156983157983156983151983154983161 983137983157983140983145983156983151983154

983080983141983160983156983154983137983139983156 983142983154983151983149 983113983107983105983113 983107983151983157983150983139983145983148 983111983157983145983140983141983148983145983150983141983155 983085 983090983088983088983096983081

bull A member of the Institute in practice shall not accept the appointment as statutory

auditor of Public Sector Undertaking(s) Government Company(ies)Listed

Company(ies) and other Public Company(ies) having turnover of Rs 50 crores

or more in a year where he accepts any other work(s) or assignment(s) or

service(s) in regard to the same Undertaking(s) Company(ies) on a remuneration which in

total exceeds the fee payable for carrying out the statutory audit of the same

Undertakingcompany

bull In regard to taking up other work(s) or service(s) or assignment(s) of the

undertakingcompany referred to above it shall be open to such associate concern or

corporate body to render such work(s) or service(s) or assignment(s) so long as

aggregate remuneration for such other work(s) or service(s) or assignment(s)

payable to the statutory auditors together with fees payable to its associate

concern(s) or corporate body(ies) dodoes not exceed the aggregate of fee

payable for carrying out the statutory audit

983107983105983086 983111983119983120983105983116 983115983122983113983123983112983118983105 983122983105983114983125 | FCA AICWA ACS PGDOR PGDFM DISA (ICA) MPhil

Tax Partner Ms K Gopal Rao amp Co Chartered Accountants Chennai

Member ndash Southern India Regional Council of The Institute of Chartered Accountants of India

Email gkricaiorg | Mobile 98400 63269

7212019 Companies act Audit and accountspdf

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5

Expert - Section 2(38)

bull Definition - ldquoexpertrdquo includes an engineer a valuer a

chartered accountant a company secretary a cost accountant

and any other person who has the power or authority to issue a

certificate in pursuance of any law for the time being in force

Professional Indemnity Insurance ndash need of the hour

bull 247(4) ndash Serious liabilitybull refund the remuneration received by him to the company and

bull pay for damages to the company or to any other person for lossarising out of incorrect or misleading statements of particulars made

in his report

All companies having subsidiary(s) need to prepare consolidated

accounts

ldquoSubsidiaryrdquo includes associate and joint ventures

Rule 5 amp 6 ndash The Companies (Accounts) Rules 2014

Form AOC-1 The Statement containing salient features of the

FS of subsidiaries associate companies Joint ventures

Consolidation of Accounts 129(3)Consolidation of Accounts 129(3)Consolidation of Accounts 129(3)Consolidation of Accounts 129(3)

1956 Position

Consolidated is not mandated for any company

Only listing agreement requires consolidation for listed companies

having subsidiaries (clause 32 of Listing agreement and AS 21)

Chapter IX ndash Accounts of Companies

Section Particulars

128 Books of Account etc to be kept by company

129 Financial Statement

130 Re-opening of accounts on courtrsquos or tribunalrsquos orders

131 Voluntary revision of financial statements or Boardrsquos Report

132 Constitution of National Financial Reporting Authority

133 Central Government to prescribe accounting standards

134 Financial statement Boardrsquos Report etc

135 Corporate Social Responsibility

136 Right of member to copies of audited financial statement

137 Copy of financial statement to be filed with registrar

138 Internal Audit

ldquobook and paperrdquoand ldquobook or paperrdquo include

Books of account

Deeds

Vouchers

Writings

Documents

Minutes and registers maintained on paper or in electronic form

book and paper and book or paper- 2(12)

ldquobooks of accountrdquo includes records maintained in respect of mdash

1 a ll sums of money received and expended by a company and matters inrelation to which the receipts and expenditure take place

2 all sales and purchases of goods and services by the company

3 the assets and liabilities of the company and

4 the items of cost as may be prescribed under section 148 in the case of acompany which belongs to any class of companies specified under that

section

Refer us 209(1) of The Companies Act 1956

Books of Account - 2(13)

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29-05-2014

6

Transitional provisions with respect to

Accounting Standards

bull The Companies (Accounts) Rules 2014

bull Rule 7

bull ICAI ndash AS continues as on date Standards as specified under companies

act 1956 shall be deemed to be the accounting standards until accounting

standards are specified by central government us 133

bull NACAS as of now NFRA later Till NFRA is constituted us 132 the central

government may prescribe the accounting standard or any addendum as

recommended by ICAI in consultation with and after examination of

recommendations made by NACAS constituted us 210A of companies Act

1956

NACAS National Advisory Committee on Accounting Standards

E-Mode ndash Rule 3

bull The Companies (Accounts) Rules 2014

bull Books of Accounts ndash Accessible (in India) Complete unaltered

bull C I A ndash Principles of Information Security but C is missing ndash only IampA is

addressed in rule

bull Rule 3(6) The company shall intimate to the registrar on an annual

basis at the time of filing of financial statement

a Name of the service provider

b The internet protocol address of service provider

c The location of the service provider (wherever applicable)

d Where the books of account and other books and papers are maintained on cloud

such address (physical) as provided by the service provider

E-Mode

bull Financial Statements ndash Section 136 ndash (Right of members to copies of audited

financial statements)

bull 21 days Notice to be sent

bull Along with a copy of the financial statements including consolidated

financial statements if any auditorrsquos report and every other documentrequired by law to be annexed or attached to the financial statements

bull To be Hosted in Website ndash Listed Company (as per Act)

E-Mode

bull The Companies (Accounts) Rules 2014

bull Rule 11 May be sent in e-mode ndash

bull All listed companies and all public companies having Net-worth gt 1 Cr amp

Turnover gt 10 Cr ndash the financial statements may be sent ndash

a By electronic mode to such members whose shareholding is in de-mat form and

whose email ids are registered with depository for communication purposes

b Where shareholding is held otherwise than by dematerialized format to such

members who have positively consented in writing for receiving by electronic mode

and

c By dispatch of physical copies through any recognized mode of delivery as specified

us 20

Boardrsquos Report shall also contain

bull The Companies (Accounts) Rules 2014

bull Rule 8 (5) Boardrsquos Report shall also contain

i the financial summary or highlights

ii the change in the nature of business if any

i ii th e details of directors or key managerial personnel who were appointed or have

resigned during the year

iv the names of companies which have become or ceased to be its Subsidiaries joint

ventures or associate companies during the year

bull The Companies (Accounts) Rules 2014

bull Rule 8 (5) Boardrsquos Report shall also contain

(v) the details relating to deposits covered under Chapter V of the Act-

(a) accepted during the year

(b) remained unpaid or unclaimed as at the end of the year

(c) whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so

number of such cases an d the total amount involved-

ndash (i) at the beginning of the year

ndash (ii) maximum during the year

ndash (iii) at the end of the year

(vi) the details of deposits which are not in compliance with the requirements of Chapter V of

the Act

(vii) the details of significant and material orders passed by the r egulators or courts or tribunals

impacting the going concern status and companyrsquos operations in future

(viii) the details in respect of adequacy of internal financial controls with reference to the

Financial Statements

7212019 Companies act Audit and accountspdf

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7

All companies including private companies who are meeting

eligibility criteria (NW ge 500 cr Turnover ge 1000 cr NP ge 5 cr)

are required to constitute a CSR committee consisting of at

least 3 directors out of which 1 must be ID and spend at least

2 of average NP on CSR activities

Corporate Social Responsibility 135Corporate Social Responsibility 135Corporate Social Responsibility 135Corporate Social Responsibility 135

1956 Position

No requirement to spend on CSR activties

CSR ndash Sec 135 amp CSR Rules

bull Net Profit ndash PBT

bull Tax treatment of CSR in accordance with proposed notification (beingstatutory expenditure ndash should be tax deductible) -

bull Professional Opportunity ndash Company Setup Trust Section 8 company Society

bull Other Trusts ndash minimum 3 year track record ndash CEO of IICA ndash DirectorGeneral Mr Bhaskar Chatterjee ndash Accreditation to NGOs ndash Govt Ratingfor NPOs ndash Partnering with ldquo Tata institute of social sciencesrdquo

bull CSR Index ndash BSE amp IICA ndash To Develop

bull Min 8000 eligible companies

bull Min Rs 12000 crores pay-off

138 - Internal Audit

bull Welcome move ndash Professional opportunity ndash Mandatory IA for listed amp Public

companies

bull CA CMA Board nominated professional

bull Rule is silent ndash Board AC to formulate - Scope Functioning periodicity

amp methodology in consultation with IA

bull Internal Auditor may or may not be

an employee of the company

bull CA means a CA whether engaged in

practice or not

Rule 13

The Companies (Accounts) Rules 2014 (all limits in preceding FY)

983110983151983148983148983151983159983145983150983143 983139983151983149983152983137983150983145983141983155 983156983151 983137983152983152983151983145983150983156 983113983150983156983141983154983150983137983148 983105983157983140983145983156983151983154 983149983137983150983140983137983156983151983154983145983148983161

983159983145983156983144983145983150 983094 983149983151983150983156983144983155 983151983142 983139983151983149983149983141983150983139983141983149983141983150983156 983151983142 983155983141983139983156983145983151983150

o Listed company

o Unlisted public company

bull Paid-up capital ge 50 crores

bull Turnover ge 200 crores

bull Os Loans or borrowings ge 100 crores

bull Os Deposits ge 25 crores

o Private Company

bull Turnover ge 200 crores

bull Os Loans or borrowings ge 100 crores (from banks or PFIs)

Rule 13(1) To appoint an internal auditor or a firm of internal auditors

NFRA

National Financial Reporting Authority

bull To be constituted by a notification of the Central Government

bull It shall consist of a Chairman (to be appointed by CG) and other members not

exceeding 15 in number

bull Chairperson and members shall make a declaration to the Central Government

regarding no conflict of interest or lack of independence in respect of his or

their appointment

bull Chairperson and members who are in full-time employment with NFRA 983155983144983137983148983148 983150983151983156

983138983141 983137983155983155983151983139983145983137983156983141983140 983159983145983156983144 983137983150983161 983137983157983140983145983156 983142983145983154983149 (including related consultancy firms) during the

course of their appointment and two years after ceasing to hold such

appointment

Constitution of NFRA

bull Yet to constitute by notification ndash Still in Draft Rules stage

bull Role of NFRA 132(2)

1 make recommendations to the Central Government on the formulation and laying

down of accounting and auditing policies and standards for adoption by

companies or class of companies or their auditors as the case may be

2 monitor and enforce the compliance with accounting standards and auditing

standards in such manner as may be prescribed

3 oversee the quality of service of the professions associated with ensuring

compliance with such standards and suggest measures required for

improvement in quality of service and such other related matters as may be

prescribed and

4 perform such other functions relating to clauses (a) (b) and (c) as may be

prescribed

7212019 Companies act Audit and accountspdf

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8

Powers of NFRA

bull Powers of NFRA 132(4)

ndash have the power to investigate either suo motu or on a

reference made to it by the Central Government

ndash imposing penalty (5 Lakh 10 Lakhs)

ndash debarring the member or the firm from engaging himself or

itself from practice

Composition of

QRB

983124983144983141 983139983157983154983154983141983150983156 983139983151983149983152983151983155983145983156983145983151983150 983151983142 983156983144983141 983106983151983137983154983140 983139983151983150983155983145983155983156983155 983151983142 983156983144983141 983142983151983148983148983151983159983145983150983143983098983085

983118983151983149983145983150983141983141983155 983151983142 983156983144983141 983107983141983150983156983154983137983148 983111983151983158983141983154983150983149983141983150983156

1 983117983154 983117 983107 983114983151983155983144983145 983113983122983123 (983122983141983156983140) 983110983151983154983149983141983154 983107983144983137983145983154983149983137983150 983107983141983150983156983154983137983148 983106983151983137983154983140 983151983142 983108983145983154983141983139983156 983124983137983160983141983155 983117983145983150983145983155983156983154983161 983151983142 983110983145983150983137983150983139983141 983111983151983158983141983154983150983149983141983150983156 983151983142 983113983150983140983145983137 983118983119983113983108983105991251 983107983144983137983145983154983152983141983154983155983151983150 (983159983141983142 2162012)

2 983117983154 983120 983117983157983154983137983148983145 983117983151983144983137983150983137 983122983137983151 983112983161983140983141983154983137983138983137983140983085 983117983141983149983138983141983154 (983159983141983142 132014)3 983117983154 983117983137983150983151983146 983115983157983149983137983154 983113983105983123 983114983151983145983150983156 983123983141983139983154983141983156983137983154983161 983117983145983150983145983155983156983154983161 983151983142 983107983151983154983152983151983154983137983156983141 983105983142983142983137983145983154983155 983111983151983158983141983154983150983149983141983150983156 983151983142 983113983150983140983145983137 983118983141983159 983108983141983148983144983145 991251983117983141983149983138983141983154 (983159983141983142

1492011)4 983117983154 983126 983123 983123983157983150983140983137983154983141983155983137983150 983107983144983145983141983142 983111983141983150983141983154983137983148 983117983137983150983137983143983141983154 983123983141983139983157983154983145983156983145983141983155 983137983150983140 983109983160983139983144983137983150983143983141 983106983151983137983154983140 983151983142 983113983150983140983145983137 983117983157983149983138983137983145 991251983117983141983149983138983141983154 (983159983141983142 5112012)5 983117983154 983111983137983157983156983137983149 983111983157983144983137 983108983145983154983141983139983156983151983154 983111983141983150983141983154983137983148 (983107983151983149983149983141983154983139983145983137983148983085983113) 983119983142983142983145983139983141 983151983142 983156983144983141 983107983151983149983152983156983154983151983148983148983141983154 amp 983105983157983140983145983156983151983154 983111983141983150983141983154983137983148 983151983142 983113983150983140983145983137 983118983141983159 983108983141983148983144983145 991251 983117983141983149983138983141983154

(983159983141983142 1262012)

983118983151983149983145983150983141983141983155 983151983142 983156983144983141 983107983151983157983150983139983145983148 983151983142 983156983144983141 983113983107983105983113 1 983107983105 983115 983122983137983143983144983157 983120983154983141983155983145983140983141983150983156 983113983107983105983113 983106983137983150983143983137983148983157983154983157 991251 983117983141983149983138983141983154 (983159983141983142 132014)2 983107983105 983117983137983150983151983146 983110983137983140983150983145983155 983126983145983139983141983085983120983154983141983155983145983140983141983150983156 983113983107983105983113 983113983150983140983151983154983141 991251 983117983141983149983138983141983154 (983159983141983142 132014)3 983107983105 983123983157983138983151983140983144 983115 983105983143983154983137983159983137983148 983113983149983149983141983140983145983137983156983141 983120983137983155983156 983120983154983141983155983145983140983141983150983156 983113983107983105983113 983115983151983148983147983137983156983137 991251 983117983141983149983138983141983154 (983159983141983142 132014)4 983107983105 983122983137983146983147983157983149983137983154 983123 983105983140983157983147983145983137 983117983157983149983138983137983145 991251 983117983141983149983138983141983154 (983159983141983142 132014)5 983107983105 983107983144983137983154983137983150983146983151983156 983123983145983150983143983144 983118983137983150983140983137 983118983141983159 983108983141983148983144983145 991251 983117983141983149983138983141983154 (983159983141983142 132014)

983123983152983141983139983145983137983148 983113983150983158983145983156983141983141983155 1 983117983154 983122 983115 983120983137983150983140983137 983111983141983150983141983154983137983148 983117983137983150983137983143983141983154 983122983141983155983141983154983158983141 983106983137983150983147 983151983142 983113983150983140983145983137 983117983157983149983138983137983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831412 983117983154 983120983154983145983156983144983158983145 983112983137983148983140983141983137 983120983137983155983156 983107983151983157983150983139983145983148 983117983141983149983138983141983154 983113983107983105983113 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831413 983117983154 983124 983115983137983154983156983144983145983147983141983161983137983150 983123983141983139983154983141983156983137983154983161 983113983107983105983113 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831414 983117983154983155 983122983141983150983157983147983137 983115983157983149983137983154 983113983105983123 983114983151983145983150983156 983123983141983139983154983141983156983137983154983161 983117983145983150983145983155983156983154983161 983151983142 983107983151983154983152983151983154983137983156983141 983105983142983142983137983145983154983155 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 983145983150983158983145983156983141983141

983123983141983139983154983141983137983156983154983161 983156983151 983156983144983141 9831069831519831379831549831401 983117983154 983117983151983144983145983156 983106983137983145983146983137983148

Financial Review and Reporting Board

Chairman CA Nilesh Vikamsey

Peer Review Board

Chairman CA Naveen N D Guptha

Revision of FS or BR ndash 131

bull ldquoIf it appears FS do not comply with section 129rdquo

bull Revision of any of the 3 preceding FY

bull Approval of tribunal with notice to IT department

bull Tribunal will issue notice amp hear auditor (Audit Working Papers ndashnecessary)

bull Carry out audit procedures necessary to changed circumstances ndashremuneration please ndash [us 142 to be fixed in GM]

bull AS 5 ndash Prior Period Items AS 4 ndash Events Occurring after BS date AS 7 ndash Construction Contracts AS 22 ndash Accounting for Taxes on Income

bull Only one revision allowed unlike gt 1 revision a llowed under IT act

Chapter X ndash Audit amp Auditors

Section Particulars

139 Appointment of auditors

140 Removal resignation of auditor and giving of special notice

141 Eligibility qualifications and disqualifications of auditors

142 Remuneration of auditors

143 Powers and duties of auditors and auditing standards

144 Auditors not to render certain services

145 Auditors to sign audit reports etc

146 Auditors to attend general meeting

147 Punishment for contravention

148 CG to specify audit of items of cost in respect of certain companies

Appointment of Auditors

bull India believes audit rotation is a positive step

bull Rule 6 ndash The Companies (Audit and Auditors) Rules 2014

bull 3 year time frame for implementation ndash Maximum number of

consecutive years for which he may be appointed in the same

company (including the Transitional Period) 3 to 4 years for Individual

auditor 3 to 9 years in case of audit firm

bull Firm Rotation ndash Mandatory

bull Partner Rotation ndash Optional Voluntary ndash Members may resolve to

provide for ndash Section 139(3)

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9

Applicability of Rotation

bull Section 139(2)

bull Rule 5 The companies (Audit and Auditors) Rules 2014

bull Class of Companies excludes OPC and Small Companies

bull Includes

bull All unlisted public companies having paid up capital of 10 croresor more

bull All private limited companies having paid up capital of 20 croresor more

bull Public borrowings from FI banks public deposits of 50 croresof more

bull 143(12) - Notwithstanding anything contained in this section if an

auditor of a company in the course of the performance of his duties

as auditor has reason to believe that an offence involving fraud is

being or has been committed against the company by officers or

employees of the company he shall immediately report the matter

to the Central Government within such time and in such manner as

may be prescribed

Fraud Reporting ndash Section 143(12)

Rule 13 ndash Report to CG

bull The companies (Audit and Auditors) Rules 2014

bull Fraud is being or has been committed against the company by officers

or employees of the company

bull Report the matter to the CG within 60 days following a procedure

bull Forward his report to board AC (immediately) ndash seeking their reply

within 45 days

bull On receipt of reply forward his report and the reply or observations of

board AC along with his comments to CG within 15 days

bull No reply from Board AC ndash even then forward to CG

Rule 13 ndash Report to CG

bull To whom

bull The Secretary Ministry of Corporate Affairs in a sealed cover by

Registered Post with ack due or Speed Post followed by an e-mail in

confirmation of the same

bull The report shall be on letter head of the auditor containing address e-

mail address and contact number and be signed by the auditor with his

seal and shall indicate his MNo

bull Form ADT-4

bull Your Attention Please This shall apply mutatis-mutandis to cost

accountant in practice and secretarial auditor

Auditors to attend General Meeting

bull 231 (Old) ndash Entitled to attend ndash optional attendance

bull 146 ndash attend either by himself or through his authorised

representative who shall also be qualified to be an auditor

any general meeting and shall have right to be heard at such meeting

on any part of the business which concerns him as the auditor ndash

Mandatory attendance

143 - Powers amp duties of Auditors and

Auditing Standards

bull 143(1)(f) - Share Capital SAMPA ndash Cash COTC where it is stated in thebooks and documents of the company that any shares have been allotted for cashwhether cash has actually been received in respect of such allotment and

if no cash has actually been so received whether the position as stated in the

account books and the balance sheet is correct regular and not

misleading

bull 143(3) ndashThe Auditorrsquos report shall also state (a) to (j) ndash SA 700 705 706 may gofor revision

bull 143(4) ndash Where any of the matters required to be included in the audit report underthis section is answered in the negative or with a qualification the report shall

state the reasons therefor

bull 143(9) - Every auditor shall comply with the auditing standards ndash 58 so

far pronounced by ICAI from SA 200 to SA 4410 ndash SA SQC SIA

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10

Powers amp duties of Auditors and Auditing

Standards

bull 143 (14) -The provisions of this section shall mutatismutandis apply tomdash

ndash (a) the cost accountant in practice conducting cost audit

under section 148 or

ndash (b) the company secretary in practice conducting secretarial

audit under section 204

141 - Eligibility Qualifications amp

Disqualifications of Auditors

bull Disqualification ndash disappointment

bull Qualification ndash Innovation termination

bull Business Relationship ndash 141(3)(e)

bull Convicted by court ndash 141(3)(h)

bull 20 Companies Limit ndash as per 141(3)(g)

bull 1 Lakh ndash Lakshman Rekha

bull Any other form of entity engaged in 144 services

Eligibility Qualifications amp

Disqualifications of Auditors

ICAI Council Guidelines ndash 2008

For the above purpose the ldquospecified number of audit assignmentsrdquo means ndash

(a) in the case of a Chartered Accountant in practice or a proprietary firm of

Chartered Accountant thirty audit assignments whether in respect of

private Companies or other Companies

(b) in the case of Chartered Accountants in practice thirty audit assignments

per partner in the firm whether in respect of private Companies or other

Companies

Provided that out of such ldquospecified number of audit assignments the

number of audit assignments of public Companies each of which has a paid-up

share capital of rupees twenty-five lakhs or more shall not exceed ten

Appointment of Auditors

bull Appointment Re-appointment are known used terms

bull Retirement Rotation Ratification 5 year break or cooling period ndash

is new eligibility criteria

bull Common Partners same network of audit firms trade mark or Brand

bull Recently US house of representatives approved a Bill that prohibited

the US regulator from mandating audit rotation

bull 147(3) ndash Serious liability

bull refund the remuneration received by him to the company and

bull pay for damages to the company statutory bodies or authorities or to anyother persons for loss arising out of incorrect or misleading statements ofparticulars made in his audit report ndash [Caution Bankers will be First]

bull 147(1) ndash Contravention liable for prosecution ndash 1 year (officer)

bull 147(2) ndash Contravention liable for Fine (25K ndash 5L) ndash prosecution 1111

year amp Fine (1L ndash 25L) (Auditor) ndash see Proviso to 147(2)

bull To provide for insurance cost in the books of accounts of professional firms ndash the

best insurance is Professional Integrity

bull 147 use the word Auditor (includes CMACS) ndash yes ndash refer 143(14)

bull Council Guidelines No1-CA(7)022008 dated 8th August 2008 -

GUIDELINES FOR THE MEMBERS OF ICAI

bull New provision

bull 144 ndash Restriction ndash One side | Independence ndash Other Side

983109983160983152983148983137983150983137983156983145983151983150983098 983124 he term ldquodirectly or indirectlyrdquo shall include rendering of services by the auditormdash

1 in case of auditor being an individual either himself or through his relative or any other person

connected or associated with such individual or through any other entity whatsoever in

which such individual has significant influence or control or whose name or trade mark orbrand is used by such individual

2 in case of auditor being a firm either itself or through any of its partners or through its parent

subsidiary or associate entity or through any other entity whatsoever in which the firm or

any partner of the firm has significant influence or control or whose name or trade mark orbrand is used by the firm or any of its partners

Auditor not to render certain

services

7212019 Companies act Audit and accountspdf

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29-05-2014

11

a) accounting and book keeping services

b) internal audit

c) design and implementation of any financial information system

d) actuarial services

e) investment advisory services

f) investment banking services

g) rendering of outsourced financial services

h) management services and

i) any other kind of services as may be prescribed

Statutory Warning Say no to these services ndash Section 144

983107983144983137983152983156983141983154 983113983128 983085 983105983152983152983151983145983150983156983149983141983150983156 983137983155 983123983156983137983156983157983156983151983154983161 983137983157983140983145983156983151983154

983080983141983160983156983154983137983139983156 983142983154983151983149 983113983107983105983113 983107983151983157983150983139983145983148 983111983157983145983140983141983148983145983150983141983155 983085 983090983088983088983096983081

bull A member of the Institute in practice shall not accept the appointment as statutory

auditor of Public Sector Undertaking(s) Government Company(ies)Listed

Company(ies) and other Public Company(ies) having turnover of Rs 50 crores

or more in a year where he accepts any other work(s) or assignment(s) or

service(s) in regard to the same Undertaking(s) Company(ies) on a remuneration which in

total exceeds the fee payable for carrying out the statutory audit of the same

Undertakingcompany

bull In regard to taking up other work(s) or service(s) or assignment(s) of the

undertakingcompany referred to above it shall be open to such associate concern or

corporate body to render such work(s) or service(s) or assignment(s) so long as

aggregate remuneration for such other work(s) or service(s) or assignment(s)

payable to the statutory auditors together with fees payable to its associate

concern(s) or corporate body(ies) dodoes not exceed the aggregate of fee

payable for carrying out the statutory audit

983107983105983086 983111983119983120983105983116 983115983122983113983123983112983118983105 983122983105983114983125 | FCA AICWA ACS PGDOR PGDFM DISA (ICA) MPhil

Tax Partner Ms K Gopal Rao amp Co Chartered Accountants Chennai

Member ndash Southern India Regional Council of The Institute of Chartered Accountants of India

Email gkricaiorg | Mobile 98400 63269

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6

Transitional provisions with respect to

Accounting Standards

bull The Companies (Accounts) Rules 2014

bull Rule 7

bull ICAI ndash AS continues as on date Standards as specified under companies

act 1956 shall be deemed to be the accounting standards until accounting

standards are specified by central government us 133

bull NACAS as of now NFRA later Till NFRA is constituted us 132 the central

government may prescribe the accounting standard or any addendum as

recommended by ICAI in consultation with and after examination of

recommendations made by NACAS constituted us 210A of companies Act

1956

NACAS National Advisory Committee on Accounting Standards

E-Mode ndash Rule 3

bull The Companies (Accounts) Rules 2014

bull Books of Accounts ndash Accessible (in India) Complete unaltered

bull C I A ndash Principles of Information Security but C is missing ndash only IampA is

addressed in rule

bull Rule 3(6) The company shall intimate to the registrar on an annual

basis at the time of filing of financial statement

a Name of the service provider

b The internet protocol address of service provider

c The location of the service provider (wherever applicable)

d Where the books of account and other books and papers are maintained on cloud

such address (physical) as provided by the service provider

E-Mode

bull Financial Statements ndash Section 136 ndash (Right of members to copies of audited

financial statements)

bull 21 days Notice to be sent

bull Along with a copy of the financial statements including consolidated

financial statements if any auditorrsquos report and every other documentrequired by law to be annexed or attached to the financial statements

bull To be Hosted in Website ndash Listed Company (as per Act)

E-Mode

bull The Companies (Accounts) Rules 2014

bull Rule 11 May be sent in e-mode ndash

bull All listed companies and all public companies having Net-worth gt 1 Cr amp

Turnover gt 10 Cr ndash the financial statements may be sent ndash

a By electronic mode to such members whose shareholding is in de-mat form and

whose email ids are registered with depository for communication purposes

b Where shareholding is held otherwise than by dematerialized format to such

members who have positively consented in writing for receiving by electronic mode

and

c By dispatch of physical copies through any recognized mode of delivery as specified

us 20

Boardrsquos Report shall also contain

bull The Companies (Accounts) Rules 2014

bull Rule 8 (5) Boardrsquos Report shall also contain

i the financial summary or highlights

ii the change in the nature of business if any

i ii th e details of directors or key managerial personnel who were appointed or have

resigned during the year

iv the names of companies which have become or ceased to be its Subsidiaries joint

ventures or associate companies during the year

bull The Companies (Accounts) Rules 2014

bull Rule 8 (5) Boardrsquos Report shall also contain

(v) the details relating to deposits covered under Chapter V of the Act-

(a) accepted during the year

(b) remained unpaid or unclaimed as at the end of the year

(c) whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so

number of such cases an d the total amount involved-

ndash (i) at the beginning of the year

ndash (ii) maximum during the year

ndash (iii) at the end of the year

(vi) the details of deposits which are not in compliance with the requirements of Chapter V of

the Act

(vii) the details of significant and material orders passed by the r egulators or courts or tribunals

impacting the going concern status and companyrsquos operations in future

(viii) the details in respect of adequacy of internal financial controls with reference to the

Financial Statements

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7

All companies including private companies who are meeting

eligibility criteria (NW ge 500 cr Turnover ge 1000 cr NP ge 5 cr)

are required to constitute a CSR committee consisting of at

least 3 directors out of which 1 must be ID and spend at least

2 of average NP on CSR activities

Corporate Social Responsibility 135Corporate Social Responsibility 135Corporate Social Responsibility 135Corporate Social Responsibility 135

1956 Position

No requirement to spend on CSR activties

CSR ndash Sec 135 amp CSR Rules

bull Net Profit ndash PBT

bull Tax treatment of CSR in accordance with proposed notification (beingstatutory expenditure ndash should be tax deductible) -

bull Professional Opportunity ndash Company Setup Trust Section 8 company Society

bull Other Trusts ndash minimum 3 year track record ndash CEO of IICA ndash DirectorGeneral Mr Bhaskar Chatterjee ndash Accreditation to NGOs ndash Govt Ratingfor NPOs ndash Partnering with ldquo Tata institute of social sciencesrdquo

bull CSR Index ndash BSE amp IICA ndash To Develop

bull Min 8000 eligible companies

bull Min Rs 12000 crores pay-off

138 - Internal Audit

bull Welcome move ndash Professional opportunity ndash Mandatory IA for listed amp Public

companies

bull CA CMA Board nominated professional

bull Rule is silent ndash Board AC to formulate - Scope Functioning periodicity

amp methodology in consultation with IA

bull Internal Auditor may or may not be

an employee of the company

bull CA means a CA whether engaged in

practice or not

Rule 13

The Companies (Accounts) Rules 2014 (all limits in preceding FY)

983110983151983148983148983151983159983145983150983143 983139983151983149983152983137983150983145983141983155 983156983151 983137983152983152983151983145983150983156 983113983150983156983141983154983150983137983148 983105983157983140983145983156983151983154 983149983137983150983140983137983156983151983154983145983148983161

983159983145983156983144983145983150 983094 983149983151983150983156983144983155 983151983142 983139983151983149983149983141983150983139983141983149983141983150983156 983151983142 983155983141983139983156983145983151983150

o Listed company

o Unlisted public company

bull Paid-up capital ge 50 crores

bull Turnover ge 200 crores

bull Os Loans or borrowings ge 100 crores

bull Os Deposits ge 25 crores

o Private Company

bull Turnover ge 200 crores

bull Os Loans or borrowings ge 100 crores (from banks or PFIs)

Rule 13(1) To appoint an internal auditor or a firm of internal auditors

NFRA

National Financial Reporting Authority

bull To be constituted by a notification of the Central Government

bull It shall consist of a Chairman (to be appointed by CG) and other members not

exceeding 15 in number

bull Chairperson and members shall make a declaration to the Central Government

regarding no conflict of interest or lack of independence in respect of his or

their appointment

bull Chairperson and members who are in full-time employment with NFRA 983155983144983137983148983148 983150983151983156

983138983141 983137983155983155983151983139983145983137983156983141983140 983159983145983156983144 983137983150983161 983137983157983140983145983156 983142983145983154983149 (including related consultancy firms) during the

course of their appointment and two years after ceasing to hold such

appointment

Constitution of NFRA

bull Yet to constitute by notification ndash Still in Draft Rules stage

bull Role of NFRA 132(2)

1 make recommendations to the Central Government on the formulation and laying

down of accounting and auditing policies and standards for adoption by

companies or class of companies or their auditors as the case may be

2 monitor and enforce the compliance with accounting standards and auditing

standards in such manner as may be prescribed

3 oversee the quality of service of the professions associated with ensuring

compliance with such standards and suggest measures required for

improvement in quality of service and such other related matters as may be

prescribed and

4 perform such other functions relating to clauses (a) (b) and (c) as may be

prescribed

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8

Powers of NFRA

bull Powers of NFRA 132(4)

ndash have the power to investigate either suo motu or on a

reference made to it by the Central Government

ndash imposing penalty (5 Lakh 10 Lakhs)

ndash debarring the member or the firm from engaging himself or

itself from practice

Composition of

QRB

983124983144983141 983139983157983154983154983141983150983156 983139983151983149983152983151983155983145983156983145983151983150 983151983142 983156983144983141 983106983151983137983154983140 983139983151983150983155983145983155983156983155 983151983142 983156983144983141 983142983151983148983148983151983159983145983150983143983098983085

983118983151983149983145983150983141983141983155 983151983142 983156983144983141 983107983141983150983156983154983137983148 983111983151983158983141983154983150983149983141983150983156

1 983117983154 983117 983107 983114983151983155983144983145 983113983122983123 (983122983141983156983140) 983110983151983154983149983141983154 983107983144983137983145983154983149983137983150 983107983141983150983156983154983137983148 983106983151983137983154983140 983151983142 983108983145983154983141983139983156 983124983137983160983141983155 983117983145983150983145983155983156983154983161 983151983142 983110983145983150983137983150983139983141 983111983151983158983141983154983150983149983141983150983156 983151983142 983113983150983140983145983137 983118983119983113983108983105991251 983107983144983137983145983154983152983141983154983155983151983150 (983159983141983142 2162012)

2 983117983154 983120 983117983157983154983137983148983145 983117983151983144983137983150983137 983122983137983151 983112983161983140983141983154983137983138983137983140983085 983117983141983149983138983141983154 (983159983141983142 132014)3 983117983154 983117983137983150983151983146 983115983157983149983137983154 983113983105983123 983114983151983145983150983156 983123983141983139983154983141983156983137983154983161 983117983145983150983145983155983156983154983161 983151983142 983107983151983154983152983151983154983137983156983141 983105983142983142983137983145983154983155 983111983151983158983141983154983150983149983141983150983156 983151983142 983113983150983140983145983137 983118983141983159 983108983141983148983144983145 991251983117983141983149983138983141983154 (983159983141983142

1492011)4 983117983154 983126 983123 983123983157983150983140983137983154983141983155983137983150 983107983144983145983141983142 983111983141983150983141983154983137983148 983117983137983150983137983143983141983154 983123983141983139983157983154983145983156983145983141983155 983137983150983140 983109983160983139983144983137983150983143983141 983106983151983137983154983140 983151983142 983113983150983140983145983137 983117983157983149983138983137983145 991251983117983141983149983138983141983154 (983159983141983142 5112012)5 983117983154 983111983137983157983156983137983149 983111983157983144983137 983108983145983154983141983139983156983151983154 983111983141983150983141983154983137983148 (983107983151983149983149983141983154983139983145983137983148983085983113) 983119983142983142983145983139983141 983151983142 983156983144983141 983107983151983149983152983156983154983151983148983148983141983154 amp 983105983157983140983145983156983151983154 983111983141983150983141983154983137983148 983151983142 983113983150983140983145983137 983118983141983159 983108983141983148983144983145 991251 983117983141983149983138983141983154

(983159983141983142 1262012)

983118983151983149983145983150983141983141983155 983151983142 983156983144983141 983107983151983157983150983139983145983148 983151983142 983156983144983141 983113983107983105983113 1 983107983105 983115 983122983137983143983144983157 983120983154983141983155983145983140983141983150983156 983113983107983105983113 983106983137983150983143983137983148983157983154983157 991251 983117983141983149983138983141983154 (983159983141983142 132014)2 983107983105 983117983137983150983151983146 983110983137983140983150983145983155 983126983145983139983141983085983120983154983141983155983145983140983141983150983156 983113983107983105983113 983113983150983140983151983154983141 991251 983117983141983149983138983141983154 (983159983141983142 132014)3 983107983105 983123983157983138983151983140983144 983115 983105983143983154983137983159983137983148 983113983149983149983141983140983145983137983156983141 983120983137983155983156 983120983154983141983155983145983140983141983150983156 983113983107983105983113 983115983151983148983147983137983156983137 991251 983117983141983149983138983141983154 (983159983141983142 132014)4 983107983105 983122983137983146983147983157983149983137983154 983123 983105983140983157983147983145983137 983117983157983149983138983137983145 991251 983117983141983149983138983141983154 (983159983141983142 132014)5 983107983105 983107983144983137983154983137983150983146983151983156 983123983145983150983143983144 983118983137983150983140983137 983118983141983159 983108983141983148983144983145 991251 983117983141983149983138983141983154 (983159983141983142 132014)

983123983152983141983139983145983137983148 983113983150983158983145983156983141983141983155 1 983117983154 983122 983115 983120983137983150983140983137 983111983141983150983141983154983137983148 983117983137983150983137983143983141983154 983122983141983155983141983154983158983141 983106983137983150983147 983151983142 983113983150983140983145983137 983117983157983149983138983137983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831412 983117983154 983120983154983145983156983144983158983145 983112983137983148983140983141983137 983120983137983155983156 983107983151983157983150983139983145983148 983117983141983149983138983141983154 983113983107983105983113 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831413 983117983154 983124 983115983137983154983156983144983145983147983141983161983137983150 983123983141983139983154983141983156983137983154983161 983113983107983105983113 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831414 983117983154983155 983122983141983150983157983147983137 983115983157983149983137983154 983113983105983123 983114983151983145983150983156 983123983141983139983154983141983156983137983154983161 983117983145983150983145983155983156983154983161 983151983142 983107983151983154983152983151983154983137983156983141 983105983142983142983137983145983154983155 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 983145983150983158983145983156983141983141

983123983141983139983154983141983137983156983154983161 983156983151 983156983144983141 9831069831519831379831549831401 983117983154 983117983151983144983145983156 983106983137983145983146983137983148

Financial Review and Reporting Board

Chairman CA Nilesh Vikamsey

Peer Review Board

Chairman CA Naveen N D Guptha

Revision of FS or BR ndash 131

bull ldquoIf it appears FS do not comply with section 129rdquo

bull Revision of any of the 3 preceding FY

bull Approval of tribunal with notice to IT department

bull Tribunal will issue notice amp hear auditor (Audit Working Papers ndashnecessary)

bull Carry out audit procedures necessary to changed circumstances ndashremuneration please ndash [us 142 to be fixed in GM]

bull AS 5 ndash Prior Period Items AS 4 ndash Events Occurring after BS date AS 7 ndash Construction Contracts AS 22 ndash Accounting for Taxes on Income

bull Only one revision allowed unlike gt 1 revision a llowed under IT act

Chapter X ndash Audit amp Auditors

Section Particulars

139 Appointment of auditors

140 Removal resignation of auditor and giving of special notice

141 Eligibility qualifications and disqualifications of auditors

142 Remuneration of auditors

143 Powers and duties of auditors and auditing standards

144 Auditors not to render certain services

145 Auditors to sign audit reports etc

146 Auditors to attend general meeting

147 Punishment for contravention

148 CG to specify audit of items of cost in respect of certain companies

Appointment of Auditors

bull India believes audit rotation is a positive step

bull Rule 6 ndash The Companies (Audit and Auditors) Rules 2014

bull 3 year time frame for implementation ndash Maximum number of

consecutive years for which he may be appointed in the same

company (including the Transitional Period) 3 to 4 years for Individual

auditor 3 to 9 years in case of audit firm

bull Firm Rotation ndash Mandatory

bull Partner Rotation ndash Optional Voluntary ndash Members may resolve to

provide for ndash Section 139(3)

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9

Applicability of Rotation

bull Section 139(2)

bull Rule 5 The companies (Audit and Auditors) Rules 2014

bull Class of Companies excludes OPC and Small Companies

bull Includes

bull All unlisted public companies having paid up capital of 10 croresor more

bull All private limited companies having paid up capital of 20 croresor more

bull Public borrowings from FI banks public deposits of 50 croresof more

bull 143(12) - Notwithstanding anything contained in this section if an

auditor of a company in the course of the performance of his duties

as auditor has reason to believe that an offence involving fraud is

being or has been committed against the company by officers or

employees of the company he shall immediately report the matter

to the Central Government within such time and in such manner as

may be prescribed

Fraud Reporting ndash Section 143(12)

Rule 13 ndash Report to CG

bull The companies (Audit and Auditors) Rules 2014

bull Fraud is being or has been committed against the company by officers

or employees of the company

bull Report the matter to the CG within 60 days following a procedure

bull Forward his report to board AC (immediately) ndash seeking their reply

within 45 days

bull On receipt of reply forward his report and the reply or observations of

board AC along with his comments to CG within 15 days

bull No reply from Board AC ndash even then forward to CG

Rule 13 ndash Report to CG

bull To whom

bull The Secretary Ministry of Corporate Affairs in a sealed cover by

Registered Post with ack due or Speed Post followed by an e-mail in

confirmation of the same

bull The report shall be on letter head of the auditor containing address e-

mail address and contact number and be signed by the auditor with his

seal and shall indicate his MNo

bull Form ADT-4

bull Your Attention Please This shall apply mutatis-mutandis to cost

accountant in practice and secretarial auditor

Auditors to attend General Meeting

bull 231 (Old) ndash Entitled to attend ndash optional attendance

bull 146 ndash attend either by himself or through his authorised

representative who shall also be qualified to be an auditor

any general meeting and shall have right to be heard at such meeting

on any part of the business which concerns him as the auditor ndash

Mandatory attendance

143 - Powers amp duties of Auditors and

Auditing Standards

bull 143(1)(f) - Share Capital SAMPA ndash Cash COTC where it is stated in thebooks and documents of the company that any shares have been allotted for cashwhether cash has actually been received in respect of such allotment and

if no cash has actually been so received whether the position as stated in the

account books and the balance sheet is correct regular and not

misleading

bull 143(3) ndashThe Auditorrsquos report shall also state (a) to (j) ndash SA 700 705 706 may gofor revision

bull 143(4) ndash Where any of the matters required to be included in the audit report underthis section is answered in the negative or with a qualification the report shall

state the reasons therefor

bull 143(9) - Every auditor shall comply with the auditing standards ndash 58 so

far pronounced by ICAI from SA 200 to SA 4410 ndash SA SQC SIA

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29-05-2014

10

Powers amp duties of Auditors and Auditing

Standards

bull 143 (14) -The provisions of this section shall mutatismutandis apply tomdash

ndash (a) the cost accountant in practice conducting cost audit

under section 148 or

ndash (b) the company secretary in practice conducting secretarial

audit under section 204

141 - Eligibility Qualifications amp

Disqualifications of Auditors

bull Disqualification ndash disappointment

bull Qualification ndash Innovation termination

bull Business Relationship ndash 141(3)(e)

bull Convicted by court ndash 141(3)(h)

bull 20 Companies Limit ndash as per 141(3)(g)

bull 1 Lakh ndash Lakshman Rekha

bull Any other form of entity engaged in 144 services

Eligibility Qualifications amp

Disqualifications of Auditors

ICAI Council Guidelines ndash 2008

For the above purpose the ldquospecified number of audit assignmentsrdquo means ndash

(a) in the case of a Chartered Accountant in practice or a proprietary firm of

Chartered Accountant thirty audit assignments whether in respect of

private Companies or other Companies

(b) in the case of Chartered Accountants in practice thirty audit assignments

per partner in the firm whether in respect of private Companies or other

Companies

Provided that out of such ldquospecified number of audit assignments the

number of audit assignments of public Companies each of which has a paid-up

share capital of rupees twenty-five lakhs or more shall not exceed ten

Appointment of Auditors

bull Appointment Re-appointment are known used terms

bull Retirement Rotation Ratification 5 year break or cooling period ndash

is new eligibility criteria

bull Common Partners same network of audit firms trade mark or Brand

bull Recently US house of representatives approved a Bill that prohibited

the US regulator from mandating audit rotation

bull 147(3) ndash Serious liability

bull refund the remuneration received by him to the company and

bull pay for damages to the company statutory bodies or authorities or to anyother persons for loss arising out of incorrect or misleading statements ofparticulars made in his audit report ndash [Caution Bankers will be First]

bull 147(1) ndash Contravention liable for prosecution ndash 1 year (officer)

bull 147(2) ndash Contravention liable for Fine (25K ndash 5L) ndash prosecution 1111

year amp Fine (1L ndash 25L) (Auditor) ndash see Proviso to 147(2)

bull To provide for insurance cost in the books of accounts of professional firms ndash the

best insurance is Professional Integrity

bull 147 use the word Auditor (includes CMACS) ndash yes ndash refer 143(14)

bull Council Guidelines No1-CA(7)022008 dated 8th August 2008 -

GUIDELINES FOR THE MEMBERS OF ICAI

bull New provision

bull 144 ndash Restriction ndash One side | Independence ndash Other Side

983109983160983152983148983137983150983137983156983145983151983150983098 983124 he term ldquodirectly or indirectlyrdquo shall include rendering of services by the auditormdash

1 in case of auditor being an individual either himself or through his relative or any other person

connected or associated with such individual or through any other entity whatsoever in

which such individual has significant influence or control or whose name or trade mark orbrand is used by such individual

2 in case of auditor being a firm either itself or through any of its partners or through its parent

subsidiary or associate entity or through any other entity whatsoever in which the firm or

any partner of the firm has significant influence or control or whose name or trade mark orbrand is used by the firm or any of its partners

Auditor not to render certain

services

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11

a) accounting and book keeping services

b) internal audit

c) design and implementation of any financial information system

d) actuarial services

e) investment advisory services

f) investment banking services

g) rendering of outsourced financial services

h) management services and

i) any other kind of services as may be prescribed

Statutory Warning Say no to these services ndash Section 144

983107983144983137983152983156983141983154 983113983128 983085 983105983152983152983151983145983150983156983149983141983150983156 983137983155 983123983156983137983156983157983156983151983154983161 983137983157983140983145983156983151983154

983080983141983160983156983154983137983139983156 983142983154983151983149 983113983107983105983113 983107983151983157983150983139983145983148 983111983157983145983140983141983148983145983150983141983155 983085 983090983088983088983096983081

bull A member of the Institute in practice shall not accept the appointment as statutory

auditor of Public Sector Undertaking(s) Government Company(ies)Listed

Company(ies) and other Public Company(ies) having turnover of Rs 50 crores

or more in a year where he accepts any other work(s) or assignment(s) or

service(s) in regard to the same Undertaking(s) Company(ies) on a remuneration which in

total exceeds the fee payable for carrying out the statutory audit of the same

Undertakingcompany

bull In regard to taking up other work(s) or service(s) or assignment(s) of the

undertakingcompany referred to above it shall be open to such associate concern or

corporate body to render such work(s) or service(s) or assignment(s) so long as

aggregate remuneration for such other work(s) or service(s) or assignment(s)

payable to the statutory auditors together with fees payable to its associate

concern(s) or corporate body(ies) dodoes not exceed the aggregate of fee

payable for carrying out the statutory audit

983107983105983086 983111983119983120983105983116 983115983122983113983123983112983118983105 983122983105983114983125 | FCA AICWA ACS PGDOR PGDFM DISA (ICA) MPhil

Tax Partner Ms K Gopal Rao amp Co Chartered Accountants Chennai

Member ndash Southern India Regional Council of The Institute of Chartered Accountants of India

Email gkricaiorg | Mobile 98400 63269

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7

All companies including private companies who are meeting

eligibility criteria (NW ge 500 cr Turnover ge 1000 cr NP ge 5 cr)

are required to constitute a CSR committee consisting of at

least 3 directors out of which 1 must be ID and spend at least

2 of average NP on CSR activities

Corporate Social Responsibility 135Corporate Social Responsibility 135Corporate Social Responsibility 135Corporate Social Responsibility 135

1956 Position

No requirement to spend on CSR activties

CSR ndash Sec 135 amp CSR Rules

bull Net Profit ndash PBT

bull Tax treatment of CSR in accordance with proposed notification (beingstatutory expenditure ndash should be tax deductible) -

bull Professional Opportunity ndash Company Setup Trust Section 8 company Society

bull Other Trusts ndash minimum 3 year track record ndash CEO of IICA ndash DirectorGeneral Mr Bhaskar Chatterjee ndash Accreditation to NGOs ndash Govt Ratingfor NPOs ndash Partnering with ldquo Tata institute of social sciencesrdquo

bull CSR Index ndash BSE amp IICA ndash To Develop

bull Min 8000 eligible companies

bull Min Rs 12000 crores pay-off

138 - Internal Audit

bull Welcome move ndash Professional opportunity ndash Mandatory IA for listed amp Public

companies

bull CA CMA Board nominated professional

bull Rule is silent ndash Board AC to formulate - Scope Functioning periodicity

amp methodology in consultation with IA

bull Internal Auditor may or may not be

an employee of the company

bull CA means a CA whether engaged in

practice or not

Rule 13

The Companies (Accounts) Rules 2014 (all limits in preceding FY)

983110983151983148983148983151983159983145983150983143 983139983151983149983152983137983150983145983141983155 983156983151 983137983152983152983151983145983150983156 983113983150983156983141983154983150983137983148 983105983157983140983145983156983151983154 983149983137983150983140983137983156983151983154983145983148983161

983159983145983156983144983145983150 983094 983149983151983150983156983144983155 983151983142 983139983151983149983149983141983150983139983141983149983141983150983156 983151983142 983155983141983139983156983145983151983150

o Listed company

o Unlisted public company

bull Paid-up capital ge 50 crores

bull Turnover ge 200 crores

bull Os Loans or borrowings ge 100 crores

bull Os Deposits ge 25 crores

o Private Company

bull Turnover ge 200 crores

bull Os Loans or borrowings ge 100 crores (from banks or PFIs)

Rule 13(1) To appoint an internal auditor or a firm of internal auditors

NFRA

National Financial Reporting Authority

bull To be constituted by a notification of the Central Government

bull It shall consist of a Chairman (to be appointed by CG) and other members not

exceeding 15 in number

bull Chairperson and members shall make a declaration to the Central Government

regarding no conflict of interest or lack of independence in respect of his or

their appointment

bull Chairperson and members who are in full-time employment with NFRA 983155983144983137983148983148 983150983151983156

983138983141 983137983155983155983151983139983145983137983156983141983140 983159983145983156983144 983137983150983161 983137983157983140983145983156 983142983145983154983149 (including related consultancy firms) during the

course of their appointment and two years after ceasing to hold such

appointment

Constitution of NFRA

bull Yet to constitute by notification ndash Still in Draft Rules stage

bull Role of NFRA 132(2)

1 make recommendations to the Central Government on the formulation and laying

down of accounting and auditing policies and standards for adoption by

companies or class of companies or their auditors as the case may be

2 monitor and enforce the compliance with accounting standards and auditing

standards in such manner as may be prescribed

3 oversee the quality of service of the professions associated with ensuring

compliance with such standards and suggest measures required for

improvement in quality of service and such other related matters as may be

prescribed and

4 perform such other functions relating to clauses (a) (b) and (c) as may be

prescribed

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8

Powers of NFRA

bull Powers of NFRA 132(4)

ndash have the power to investigate either suo motu or on a

reference made to it by the Central Government

ndash imposing penalty (5 Lakh 10 Lakhs)

ndash debarring the member or the firm from engaging himself or

itself from practice

Composition of

QRB

983124983144983141 983139983157983154983154983141983150983156 983139983151983149983152983151983155983145983156983145983151983150 983151983142 983156983144983141 983106983151983137983154983140 983139983151983150983155983145983155983156983155 983151983142 983156983144983141 983142983151983148983148983151983159983145983150983143983098983085

983118983151983149983145983150983141983141983155 983151983142 983156983144983141 983107983141983150983156983154983137983148 983111983151983158983141983154983150983149983141983150983156

1 983117983154 983117 983107 983114983151983155983144983145 983113983122983123 (983122983141983156983140) 983110983151983154983149983141983154 983107983144983137983145983154983149983137983150 983107983141983150983156983154983137983148 983106983151983137983154983140 983151983142 983108983145983154983141983139983156 983124983137983160983141983155 983117983145983150983145983155983156983154983161 983151983142 983110983145983150983137983150983139983141 983111983151983158983141983154983150983149983141983150983156 983151983142 983113983150983140983145983137 983118983119983113983108983105991251 983107983144983137983145983154983152983141983154983155983151983150 (983159983141983142 2162012)

2 983117983154 983120 983117983157983154983137983148983145 983117983151983144983137983150983137 983122983137983151 983112983161983140983141983154983137983138983137983140983085 983117983141983149983138983141983154 (983159983141983142 132014)3 983117983154 983117983137983150983151983146 983115983157983149983137983154 983113983105983123 983114983151983145983150983156 983123983141983139983154983141983156983137983154983161 983117983145983150983145983155983156983154983161 983151983142 983107983151983154983152983151983154983137983156983141 983105983142983142983137983145983154983155 983111983151983158983141983154983150983149983141983150983156 983151983142 983113983150983140983145983137 983118983141983159 983108983141983148983144983145 991251983117983141983149983138983141983154 (983159983141983142

1492011)4 983117983154 983126 983123 983123983157983150983140983137983154983141983155983137983150 983107983144983145983141983142 983111983141983150983141983154983137983148 983117983137983150983137983143983141983154 983123983141983139983157983154983145983156983145983141983155 983137983150983140 983109983160983139983144983137983150983143983141 983106983151983137983154983140 983151983142 983113983150983140983145983137 983117983157983149983138983137983145 991251983117983141983149983138983141983154 (983159983141983142 5112012)5 983117983154 983111983137983157983156983137983149 983111983157983144983137 983108983145983154983141983139983156983151983154 983111983141983150983141983154983137983148 (983107983151983149983149983141983154983139983145983137983148983085983113) 983119983142983142983145983139983141 983151983142 983156983144983141 983107983151983149983152983156983154983151983148983148983141983154 amp 983105983157983140983145983156983151983154 983111983141983150983141983154983137983148 983151983142 983113983150983140983145983137 983118983141983159 983108983141983148983144983145 991251 983117983141983149983138983141983154

(983159983141983142 1262012)

983118983151983149983145983150983141983141983155 983151983142 983156983144983141 983107983151983157983150983139983145983148 983151983142 983156983144983141 983113983107983105983113 1 983107983105 983115 983122983137983143983144983157 983120983154983141983155983145983140983141983150983156 983113983107983105983113 983106983137983150983143983137983148983157983154983157 991251 983117983141983149983138983141983154 (983159983141983142 132014)2 983107983105 983117983137983150983151983146 983110983137983140983150983145983155 983126983145983139983141983085983120983154983141983155983145983140983141983150983156 983113983107983105983113 983113983150983140983151983154983141 991251 983117983141983149983138983141983154 (983159983141983142 132014)3 983107983105 983123983157983138983151983140983144 983115 983105983143983154983137983159983137983148 983113983149983149983141983140983145983137983156983141 983120983137983155983156 983120983154983141983155983145983140983141983150983156 983113983107983105983113 983115983151983148983147983137983156983137 991251 983117983141983149983138983141983154 (983159983141983142 132014)4 983107983105 983122983137983146983147983157983149983137983154 983123 983105983140983157983147983145983137 983117983157983149983138983137983145 991251 983117983141983149983138983141983154 (983159983141983142 132014)5 983107983105 983107983144983137983154983137983150983146983151983156 983123983145983150983143983144 983118983137983150983140983137 983118983141983159 983108983141983148983144983145 991251 983117983141983149983138983141983154 (983159983141983142 132014)

983123983152983141983139983145983137983148 983113983150983158983145983156983141983141983155 1 983117983154 983122 983115 983120983137983150983140983137 983111983141983150983141983154983137983148 983117983137983150983137983143983141983154 983122983141983155983141983154983158983141 983106983137983150983147 983151983142 983113983150983140983145983137 983117983157983149983138983137983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831412 983117983154 983120983154983145983156983144983158983145 983112983137983148983140983141983137 983120983137983155983156 983107983151983157983150983139983145983148 983117983141983149983138983141983154 983113983107983105983113 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831413 983117983154 983124 983115983137983154983156983144983145983147983141983161983137983150 983123983141983139983154983141983156983137983154983161 983113983107983105983113 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831414 983117983154983155 983122983141983150983157983147983137 983115983157983149983137983154 983113983105983123 983114983151983145983150983156 983123983141983139983154983141983156983137983154983161 983117983145983150983145983155983156983154983161 983151983142 983107983151983154983152983151983154983137983156983141 983105983142983142983137983145983154983155 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 983145983150983158983145983156983141983141

983123983141983139983154983141983137983156983154983161 983156983151 983156983144983141 9831069831519831379831549831401 983117983154 983117983151983144983145983156 983106983137983145983146983137983148

Financial Review and Reporting Board

Chairman CA Nilesh Vikamsey

Peer Review Board

Chairman CA Naveen N D Guptha

Revision of FS or BR ndash 131

bull ldquoIf it appears FS do not comply with section 129rdquo

bull Revision of any of the 3 preceding FY

bull Approval of tribunal with notice to IT department

bull Tribunal will issue notice amp hear auditor (Audit Working Papers ndashnecessary)

bull Carry out audit procedures necessary to changed circumstances ndashremuneration please ndash [us 142 to be fixed in GM]

bull AS 5 ndash Prior Period Items AS 4 ndash Events Occurring after BS date AS 7 ndash Construction Contracts AS 22 ndash Accounting for Taxes on Income

bull Only one revision allowed unlike gt 1 revision a llowed under IT act

Chapter X ndash Audit amp Auditors

Section Particulars

139 Appointment of auditors

140 Removal resignation of auditor and giving of special notice

141 Eligibility qualifications and disqualifications of auditors

142 Remuneration of auditors

143 Powers and duties of auditors and auditing standards

144 Auditors not to render certain services

145 Auditors to sign audit reports etc

146 Auditors to attend general meeting

147 Punishment for contravention

148 CG to specify audit of items of cost in respect of certain companies

Appointment of Auditors

bull India believes audit rotation is a positive step

bull Rule 6 ndash The Companies (Audit and Auditors) Rules 2014

bull 3 year time frame for implementation ndash Maximum number of

consecutive years for which he may be appointed in the same

company (including the Transitional Period) 3 to 4 years for Individual

auditor 3 to 9 years in case of audit firm

bull Firm Rotation ndash Mandatory

bull Partner Rotation ndash Optional Voluntary ndash Members may resolve to

provide for ndash Section 139(3)

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9

Applicability of Rotation

bull Section 139(2)

bull Rule 5 The companies (Audit and Auditors) Rules 2014

bull Class of Companies excludes OPC and Small Companies

bull Includes

bull All unlisted public companies having paid up capital of 10 croresor more

bull All private limited companies having paid up capital of 20 croresor more

bull Public borrowings from FI banks public deposits of 50 croresof more

bull 143(12) - Notwithstanding anything contained in this section if an

auditor of a company in the course of the performance of his duties

as auditor has reason to believe that an offence involving fraud is

being or has been committed against the company by officers or

employees of the company he shall immediately report the matter

to the Central Government within such time and in such manner as

may be prescribed

Fraud Reporting ndash Section 143(12)

Rule 13 ndash Report to CG

bull The companies (Audit and Auditors) Rules 2014

bull Fraud is being or has been committed against the company by officers

or employees of the company

bull Report the matter to the CG within 60 days following a procedure

bull Forward his report to board AC (immediately) ndash seeking their reply

within 45 days

bull On receipt of reply forward his report and the reply or observations of

board AC along with his comments to CG within 15 days

bull No reply from Board AC ndash even then forward to CG

Rule 13 ndash Report to CG

bull To whom

bull The Secretary Ministry of Corporate Affairs in a sealed cover by

Registered Post with ack due or Speed Post followed by an e-mail in

confirmation of the same

bull The report shall be on letter head of the auditor containing address e-

mail address and contact number and be signed by the auditor with his

seal and shall indicate his MNo

bull Form ADT-4

bull Your Attention Please This shall apply mutatis-mutandis to cost

accountant in practice and secretarial auditor

Auditors to attend General Meeting

bull 231 (Old) ndash Entitled to attend ndash optional attendance

bull 146 ndash attend either by himself or through his authorised

representative who shall also be qualified to be an auditor

any general meeting and shall have right to be heard at such meeting

on any part of the business which concerns him as the auditor ndash

Mandatory attendance

143 - Powers amp duties of Auditors and

Auditing Standards

bull 143(1)(f) - Share Capital SAMPA ndash Cash COTC where it is stated in thebooks and documents of the company that any shares have been allotted for cashwhether cash has actually been received in respect of such allotment and

if no cash has actually been so received whether the position as stated in the

account books and the balance sheet is correct regular and not

misleading

bull 143(3) ndashThe Auditorrsquos report shall also state (a) to (j) ndash SA 700 705 706 may gofor revision

bull 143(4) ndash Where any of the matters required to be included in the audit report underthis section is answered in the negative or with a qualification the report shall

state the reasons therefor

bull 143(9) - Every auditor shall comply with the auditing standards ndash 58 so

far pronounced by ICAI from SA 200 to SA 4410 ndash SA SQC SIA

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10

Powers amp duties of Auditors and Auditing

Standards

bull 143 (14) -The provisions of this section shall mutatismutandis apply tomdash

ndash (a) the cost accountant in practice conducting cost audit

under section 148 or

ndash (b) the company secretary in practice conducting secretarial

audit under section 204

141 - Eligibility Qualifications amp

Disqualifications of Auditors

bull Disqualification ndash disappointment

bull Qualification ndash Innovation termination

bull Business Relationship ndash 141(3)(e)

bull Convicted by court ndash 141(3)(h)

bull 20 Companies Limit ndash as per 141(3)(g)

bull 1 Lakh ndash Lakshman Rekha

bull Any other form of entity engaged in 144 services

Eligibility Qualifications amp

Disqualifications of Auditors

ICAI Council Guidelines ndash 2008

For the above purpose the ldquospecified number of audit assignmentsrdquo means ndash

(a) in the case of a Chartered Accountant in practice or a proprietary firm of

Chartered Accountant thirty audit assignments whether in respect of

private Companies or other Companies

(b) in the case of Chartered Accountants in practice thirty audit assignments

per partner in the firm whether in respect of private Companies or other

Companies

Provided that out of such ldquospecified number of audit assignments the

number of audit assignments of public Companies each of which has a paid-up

share capital of rupees twenty-five lakhs or more shall not exceed ten

Appointment of Auditors

bull Appointment Re-appointment are known used terms

bull Retirement Rotation Ratification 5 year break or cooling period ndash

is new eligibility criteria

bull Common Partners same network of audit firms trade mark or Brand

bull Recently US house of representatives approved a Bill that prohibited

the US regulator from mandating audit rotation

bull 147(3) ndash Serious liability

bull refund the remuneration received by him to the company and

bull pay for damages to the company statutory bodies or authorities or to anyother persons for loss arising out of incorrect or misleading statements ofparticulars made in his audit report ndash [Caution Bankers will be First]

bull 147(1) ndash Contravention liable for prosecution ndash 1 year (officer)

bull 147(2) ndash Contravention liable for Fine (25K ndash 5L) ndash prosecution 1111

year amp Fine (1L ndash 25L) (Auditor) ndash see Proviso to 147(2)

bull To provide for insurance cost in the books of accounts of professional firms ndash the

best insurance is Professional Integrity

bull 147 use the word Auditor (includes CMACS) ndash yes ndash refer 143(14)

bull Council Guidelines No1-CA(7)022008 dated 8th August 2008 -

GUIDELINES FOR THE MEMBERS OF ICAI

bull New provision

bull 144 ndash Restriction ndash One side | Independence ndash Other Side

983109983160983152983148983137983150983137983156983145983151983150983098 983124 he term ldquodirectly or indirectlyrdquo shall include rendering of services by the auditormdash

1 in case of auditor being an individual either himself or through his relative or any other person

connected or associated with such individual or through any other entity whatsoever in

which such individual has significant influence or control or whose name or trade mark orbrand is used by such individual

2 in case of auditor being a firm either itself or through any of its partners or through its parent

subsidiary or associate entity or through any other entity whatsoever in which the firm or

any partner of the firm has significant influence or control or whose name or trade mark orbrand is used by the firm or any of its partners

Auditor not to render certain

services

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11

a) accounting and book keeping services

b) internal audit

c) design and implementation of any financial information system

d) actuarial services

e) investment advisory services

f) investment banking services

g) rendering of outsourced financial services

h) management services and

i) any other kind of services as may be prescribed

Statutory Warning Say no to these services ndash Section 144

983107983144983137983152983156983141983154 983113983128 983085 983105983152983152983151983145983150983156983149983141983150983156 983137983155 983123983156983137983156983157983156983151983154983161 983137983157983140983145983156983151983154

983080983141983160983156983154983137983139983156 983142983154983151983149 983113983107983105983113 983107983151983157983150983139983145983148 983111983157983145983140983141983148983145983150983141983155 983085 983090983088983088983096983081

bull A member of the Institute in practice shall not accept the appointment as statutory

auditor of Public Sector Undertaking(s) Government Company(ies)Listed

Company(ies) and other Public Company(ies) having turnover of Rs 50 crores

or more in a year where he accepts any other work(s) or assignment(s) or

service(s) in regard to the same Undertaking(s) Company(ies) on a remuneration which in

total exceeds the fee payable for carrying out the statutory audit of the same

Undertakingcompany

bull In regard to taking up other work(s) or service(s) or assignment(s) of the

undertakingcompany referred to above it shall be open to such associate concern or

corporate body to render such work(s) or service(s) or assignment(s) so long as

aggregate remuneration for such other work(s) or service(s) or assignment(s)

payable to the statutory auditors together with fees payable to its associate

concern(s) or corporate body(ies) dodoes not exceed the aggregate of fee

payable for carrying out the statutory audit

983107983105983086 983111983119983120983105983116 983115983122983113983123983112983118983105 983122983105983114983125 | FCA AICWA ACS PGDOR PGDFM DISA (ICA) MPhil

Tax Partner Ms K Gopal Rao amp Co Chartered Accountants Chennai

Member ndash Southern India Regional Council of The Institute of Chartered Accountants of India

Email gkricaiorg | Mobile 98400 63269

7212019 Companies act Audit and accountspdf

httpslidepdfcomreaderfullcompanies-act-audit-and-accountspdf 811

29-05-2014

8

Powers of NFRA

bull Powers of NFRA 132(4)

ndash have the power to investigate either suo motu or on a

reference made to it by the Central Government

ndash imposing penalty (5 Lakh 10 Lakhs)

ndash debarring the member or the firm from engaging himself or

itself from practice

Composition of

QRB

983124983144983141 983139983157983154983154983141983150983156 983139983151983149983152983151983155983145983156983145983151983150 983151983142 983156983144983141 983106983151983137983154983140 983139983151983150983155983145983155983156983155 983151983142 983156983144983141 983142983151983148983148983151983159983145983150983143983098983085

983118983151983149983145983150983141983141983155 983151983142 983156983144983141 983107983141983150983156983154983137983148 983111983151983158983141983154983150983149983141983150983156

1 983117983154 983117 983107 983114983151983155983144983145 983113983122983123 (983122983141983156983140) 983110983151983154983149983141983154 983107983144983137983145983154983149983137983150 983107983141983150983156983154983137983148 983106983151983137983154983140 983151983142 983108983145983154983141983139983156 983124983137983160983141983155 983117983145983150983145983155983156983154983161 983151983142 983110983145983150983137983150983139983141 983111983151983158983141983154983150983149983141983150983156 983151983142 983113983150983140983145983137 983118983119983113983108983105991251 983107983144983137983145983154983152983141983154983155983151983150 (983159983141983142 2162012)

2 983117983154 983120 983117983157983154983137983148983145 983117983151983144983137983150983137 983122983137983151 983112983161983140983141983154983137983138983137983140983085 983117983141983149983138983141983154 (983159983141983142 132014)3 983117983154 983117983137983150983151983146 983115983157983149983137983154 983113983105983123 983114983151983145983150983156 983123983141983139983154983141983156983137983154983161 983117983145983150983145983155983156983154983161 983151983142 983107983151983154983152983151983154983137983156983141 983105983142983142983137983145983154983155 983111983151983158983141983154983150983149983141983150983156 983151983142 983113983150983140983145983137 983118983141983159 983108983141983148983144983145 991251983117983141983149983138983141983154 (983159983141983142

1492011)4 983117983154 983126 983123 983123983157983150983140983137983154983141983155983137983150 983107983144983145983141983142 983111983141983150983141983154983137983148 983117983137983150983137983143983141983154 983123983141983139983157983154983145983156983145983141983155 983137983150983140 983109983160983139983144983137983150983143983141 983106983151983137983154983140 983151983142 983113983150983140983145983137 983117983157983149983138983137983145 991251983117983141983149983138983141983154 (983159983141983142 5112012)5 983117983154 983111983137983157983156983137983149 983111983157983144983137 983108983145983154983141983139983156983151983154 983111983141983150983141983154983137983148 (983107983151983149983149983141983154983139983145983137983148983085983113) 983119983142983142983145983139983141 983151983142 983156983144983141 983107983151983149983152983156983154983151983148983148983141983154 amp 983105983157983140983145983156983151983154 983111983141983150983141983154983137983148 983151983142 983113983150983140983145983137 983118983141983159 983108983141983148983144983145 991251 983117983141983149983138983141983154

(983159983141983142 1262012)

983118983151983149983145983150983141983141983155 983151983142 983156983144983141 983107983151983157983150983139983145983148 983151983142 983156983144983141 983113983107983105983113 1 983107983105 983115 983122983137983143983144983157 983120983154983141983155983145983140983141983150983156 983113983107983105983113 983106983137983150983143983137983148983157983154983157 991251 983117983141983149983138983141983154 (983159983141983142 132014)2 983107983105 983117983137983150983151983146 983110983137983140983150983145983155 983126983145983139983141983085983120983154983141983155983145983140983141983150983156 983113983107983105983113 983113983150983140983151983154983141 991251 983117983141983149983138983141983154 (983159983141983142 132014)3 983107983105 983123983157983138983151983140983144 983115 983105983143983154983137983159983137983148 983113983149983149983141983140983145983137983156983141 983120983137983155983156 983120983154983141983155983145983140983141983150983156 983113983107983105983113 983115983151983148983147983137983156983137 991251 983117983141983149983138983141983154 (983159983141983142 132014)4 983107983105 983122983137983146983147983157983149983137983154 983123 983105983140983157983147983145983137 983117983157983149983138983137983145 991251 983117983141983149983138983141983154 (983159983141983142 132014)5 983107983105 983107983144983137983154983137983150983146983151983156 983123983145983150983143983144 983118983137983150983140983137 983118983141983159 983108983141983148983144983145 991251 983117983141983149983138983141983154 (983159983141983142 132014)

983123983152983141983139983145983137983148 983113983150983158983145983156983141983141983155 1 983117983154 983122 983115 983120983137983150983140983137 983111983141983150983141983154983137983148 983117983137983150983137983143983141983154 983122983141983155983141983154983158983141 983106983137983150983147 983151983142 983113983150983140983145983137 983117983157983149983138983137983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831412 983117983154 983120983154983145983156983144983158983145 983112983137983148983140983141983137 983120983137983155983156 983107983151983157983150983139983145983148 983117983141983149983138983141983154 983113983107983105983113 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831413 983117983154 983124 983115983137983154983156983144983145983147983141983161983137983150 983123983141983139983154983141983156983137983154983161 983113983107983105983113 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 9831459831509831589831459831569831419831414 983117983154983155 983122983141983150983157983147983137 983115983157983149983137983154 983113983105983123 983114983151983145983150983156 983123983141983139983154983141983156983137983154983161 983117983145983150983145983155983156983154983161 983151983142 983107983151983154983152983151983154983137983156983141 983105983142983142983137983145983154983155 983118983141983159 983108983141983148983144983145 991251 983123983152983141983139983145983137983148 983145983150983158983145983156983141983141

983123983141983139983154983141983137983156983154983161 983156983151 983156983144983141 9831069831519831379831549831401 983117983154 983117983151983144983145983156 983106983137983145983146983137983148

Financial Review and Reporting Board

Chairman CA Nilesh Vikamsey

Peer Review Board

Chairman CA Naveen N D Guptha

Revision of FS or BR ndash 131

bull ldquoIf it appears FS do not comply with section 129rdquo

bull Revision of any of the 3 preceding FY

bull Approval of tribunal with notice to IT department

bull Tribunal will issue notice amp hear auditor (Audit Working Papers ndashnecessary)

bull Carry out audit procedures necessary to changed circumstances ndashremuneration please ndash [us 142 to be fixed in GM]

bull AS 5 ndash Prior Period Items AS 4 ndash Events Occurring after BS date AS 7 ndash Construction Contracts AS 22 ndash Accounting for Taxes on Income

bull Only one revision allowed unlike gt 1 revision a llowed under IT act

Chapter X ndash Audit amp Auditors

Section Particulars

139 Appointment of auditors

140 Removal resignation of auditor and giving of special notice

141 Eligibility qualifications and disqualifications of auditors

142 Remuneration of auditors

143 Powers and duties of auditors and auditing standards

144 Auditors not to render certain services

145 Auditors to sign audit reports etc

146 Auditors to attend general meeting

147 Punishment for contravention

148 CG to specify audit of items of cost in respect of certain companies

Appointment of Auditors

bull India believes audit rotation is a positive step

bull Rule 6 ndash The Companies (Audit and Auditors) Rules 2014

bull 3 year time frame for implementation ndash Maximum number of

consecutive years for which he may be appointed in the same

company (including the Transitional Period) 3 to 4 years for Individual

auditor 3 to 9 years in case of audit firm

bull Firm Rotation ndash Mandatory

bull Partner Rotation ndash Optional Voluntary ndash Members may resolve to

provide for ndash Section 139(3)

7212019 Companies act Audit and accountspdf

httpslidepdfcomreaderfullcompanies-act-audit-and-accountspdf 911

29-05-2014

9

Applicability of Rotation

bull Section 139(2)

bull Rule 5 The companies (Audit and Auditors) Rules 2014

bull Class of Companies excludes OPC and Small Companies

bull Includes

bull All unlisted public companies having paid up capital of 10 croresor more

bull All private limited companies having paid up capital of 20 croresor more

bull Public borrowings from FI banks public deposits of 50 croresof more

bull 143(12) - Notwithstanding anything contained in this section if an

auditor of a company in the course of the performance of his duties

as auditor has reason to believe that an offence involving fraud is

being or has been committed against the company by officers or

employees of the company he shall immediately report the matter

to the Central Government within such time and in such manner as

may be prescribed

Fraud Reporting ndash Section 143(12)

Rule 13 ndash Report to CG

bull The companies (Audit and Auditors) Rules 2014

bull Fraud is being or has been committed against the company by officers

or employees of the company

bull Report the matter to the CG within 60 days following a procedure

bull Forward his report to board AC (immediately) ndash seeking their reply

within 45 days

bull On receipt of reply forward his report and the reply or observations of

board AC along with his comments to CG within 15 days

bull No reply from Board AC ndash even then forward to CG

Rule 13 ndash Report to CG

bull To whom

bull The Secretary Ministry of Corporate Affairs in a sealed cover by

Registered Post with ack due or Speed Post followed by an e-mail in

confirmation of the same

bull The report shall be on letter head of the auditor containing address e-

mail address and contact number and be signed by the auditor with his

seal and shall indicate his MNo

bull Form ADT-4

bull Your Attention Please This shall apply mutatis-mutandis to cost

accountant in practice and secretarial auditor

Auditors to attend General Meeting

bull 231 (Old) ndash Entitled to attend ndash optional attendance

bull 146 ndash attend either by himself or through his authorised

representative who shall also be qualified to be an auditor

any general meeting and shall have right to be heard at such meeting

on any part of the business which concerns him as the auditor ndash

Mandatory attendance

143 - Powers amp duties of Auditors and

Auditing Standards

bull 143(1)(f) - Share Capital SAMPA ndash Cash COTC where it is stated in thebooks and documents of the company that any shares have been allotted for cashwhether cash has actually been received in respect of such allotment and

if no cash has actually been so received whether the position as stated in the

account books and the balance sheet is correct regular and not

misleading

bull 143(3) ndashThe Auditorrsquos report shall also state (a) to (j) ndash SA 700 705 706 may gofor revision

bull 143(4) ndash Where any of the matters required to be included in the audit report underthis section is answered in the negative or with a qualification the report shall

state the reasons therefor

bull 143(9) - Every auditor shall comply with the auditing standards ndash 58 so

far pronounced by ICAI from SA 200 to SA 4410 ndash SA SQC SIA

7212019 Companies act Audit and accountspdf

httpslidepdfcomreaderfullcompanies-act-audit-and-accountspdf 1011

29-05-2014

10

Powers amp duties of Auditors and Auditing

Standards

bull 143 (14) -The provisions of this section shall mutatismutandis apply tomdash

ndash (a) the cost accountant in practice conducting cost audit

under section 148 or

ndash (b) the company secretary in practice conducting secretarial

audit under section 204

141 - Eligibility Qualifications amp

Disqualifications of Auditors

bull Disqualification ndash disappointment

bull Qualification ndash Innovation termination

bull Business Relationship ndash 141(3)(e)

bull Convicted by court ndash 141(3)(h)

bull 20 Companies Limit ndash as per 141(3)(g)

bull 1 Lakh ndash Lakshman Rekha

bull Any other form of entity engaged in 144 services

Eligibility Qualifications amp

Disqualifications of Auditors

ICAI Council Guidelines ndash 2008

For the above purpose the ldquospecified number of audit assignmentsrdquo means ndash

(a) in the case of a Chartered Accountant in practice or a proprietary firm of

Chartered Accountant thirty audit assignments whether in respect of

private Companies or other Companies

(b) in the case of Chartered Accountants in practice thirty audit assignments

per partner in the firm whether in respect of private Companies or other

Companies

Provided that out of such ldquospecified number of audit assignments the

number of audit assignments of public Companies each of which has a paid-up

share capital of rupees twenty-five lakhs or more shall not exceed ten

Appointment of Auditors

bull Appointment Re-appointment are known used terms

bull Retirement Rotation Ratification 5 year break or cooling period ndash

is new eligibility criteria

bull Common Partners same network of audit firms trade mark or Brand

bull Recently US house of representatives approved a Bill that prohibited

the US regulator from mandating audit rotation

bull 147(3) ndash Serious liability

bull refund the remuneration received by him to the company and

bull pay for damages to the company statutory bodies or authorities or to anyother persons for loss arising out of incorrect or misleading statements ofparticulars made in his audit report ndash [Caution Bankers will be First]

bull 147(1) ndash Contravention liable for prosecution ndash 1 year (officer)

bull 147(2) ndash Contravention liable for Fine (25K ndash 5L) ndash prosecution 1111

year amp Fine (1L ndash 25L) (Auditor) ndash see Proviso to 147(2)

bull To provide for insurance cost in the books of accounts of professional firms ndash the

best insurance is Professional Integrity

bull 147 use the word Auditor (includes CMACS) ndash yes ndash refer 143(14)

bull Council Guidelines No1-CA(7)022008 dated 8th August 2008 -

GUIDELINES FOR THE MEMBERS OF ICAI

bull New provision

bull 144 ndash Restriction ndash One side | Independence ndash Other Side

983109983160983152983148983137983150983137983156983145983151983150983098 983124 he term ldquodirectly or indirectlyrdquo shall include rendering of services by the auditormdash

1 in case of auditor being an individual either himself or through his relative or any other person

connected or associated with such individual or through any other entity whatsoever in

which such individual has significant influence or control or whose name or trade mark orbrand is used by such individual

2 in case of auditor being a firm either itself or through any of its partners or through its parent

subsidiary or associate entity or through any other entity whatsoever in which the firm or

any partner of the firm has significant influence or control or whose name or trade mark orbrand is used by the firm or any of its partners

Auditor not to render certain

services

7212019 Companies act Audit and accountspdf

httpslidepdfcomreaderfullcompanies-act-audit-and-accountspdf 1111

29-05-2014

11

a) accounting and book keeping services

b) internal audit

c) design and implementation of any financial information system

d) actuarial services

e) investment advisory services

f) investment banking services

g) rendering of outsourced financial services

h) management services and

i) any other kind of services as may be prescribed

Statutory Warning Say no to these services ndash Section 144

983107983144983137983152983156983141983154 983113983128 983085 983105983152983152983151983145983150983156983149983141983150983156 983137983155 983123983156983137983156983157983156983151983154983161 983137983157983140983145983156983151983154

983080983141983160983156983154983137983139983156 983142983154983151983149 983113983107983105983113 983107983151983157983150983139983145983148 983111983157983145983140983141983148983145983150983141983155 983085 983090983088983088983096983081

bull A member of the Institute in practice shall not accept the appointment as statutory

auditor of Public Sector Undertaking(s) Government Company(ies)Listed

Company(ies) and other Public Company(ies) having turnover of Rs 50 crores

or more in a year where he accepts any other work(s) or assignment(s) or

service(s) in regard to the same Undertaking(s) Company(ies) on a remuneration which in

total exceeds the fee payable for carrying out the statutory audit of the same

Undertakingcompany

bull In regard to taking up other work(s) or service(s) or assignment(s) of the

undertakingcompany referred to above it shall be open to such associate concern or

corporate body to render such work(s) or service(s) or assignment(s) so long as

aggregate remuneration for such other work(s) or service(s) or assignment(s)

payable to the statutory auditors together with fees payable to its associate

concern(s) or corporate body(ies) dodoes not exceed the aggregate of fee

payable for carrying out the statutory audit

983107983105983086 983111983119983120983105983116 983115983122983113983123983112983118983105 983122983105983114983125 | FCA AICWA ACS PGDOR PGDFM DISA (ICA) MPhil

Tax Partner Ms K Gopal Rao amp Co Chartered Accountants Chennai

Member ndash Southern India Regional Council of The Institute of Chartered Accountants of India

Email gkricaiorg | Mobile 98400 63269

7212019 Companies act Audit and accountspdf

httpslidepdfcomreaderfullcompanies-act-audit-and-accountspdf 911

29-05-2014

9

Applicability of Rotation

bull Section 139(2)

bull Rule 5 The companies (Audit and Auditors) Rules 2014

bull Class of Companies excludes OPC and Small Companies

bull Includes

bull All unlisted public companies having paid up capital of 10 croresor more

bull All private limited companies having paid up capital of 20 croresor more

bull Public borrowings from FI banks public deposits of 50 croresof more

bull 143(12) - Notwithstanding anything contained in this section if an

auditor of a company in the course of the performance of his duties

as auditor has reason to believe that an offence involving fraud is

being or has been committed against the company by officers or

employees of the company he shall immediately report the matter

to the Central Government within such time and in such manner as

may be prescribed

Fraud Reporting ndash Section 143(12)

Rule 13 ndash Report to CG

bull The companies (Audit and Auditors) Rules 2014

bull Fraud is being or has been committed against the company by officers

or employees of the company

bull Report the matter to the CG within 60 days following a procedure

bull Forward his report to board AC (immediately) ndash seeking their reply

within 45 days

bull On receipt of reply forward his report and the reply or observations of

board AC along with his comments to CG within 15 days

bull No reply from Board AC ndash even then forward to CG

Rule 13 ndash Report to CG

bull To whom

bull The Secretary Ministry of Corporate Affairs in a sealed cover by

Registered Post with ack due or Speed Post followed by an e-mail in

confirmation of the same

bull The report shall be on letter head of the auditor containing address e-

mail address and contact number and be signed by the auditor with his

seal and shall indicate his MNo

bull Form ADT-4

bull Your Attention Please This shall apply mutatis-mutandis to cost

accountant in practice and secretarial auditor

Auditors to attend General Meeting

bull 231 (Old) ndash Entitled to attend ndash optional attendance

bull 146 ndash attend either by himself or through his authorised

representative who shall also be qualified to be an auditor

any general meeting and shall have right to be heard at such meeting

on any part of the business which concerns him as the auditor ndash

Mandatory attendance

143 - Powers amp duties of Auditors and

Auditing Standards

bull 143(1)(f) - Share Capital SAMPA ndash Cash COTC where it is stated in thebooks and documents of the company that any shares have been allotted for cashwhether cash has actually been received in respect of such allotment and

if no cash has actually been so received whether the position as stated in the

account books and the balance sheet is correct regular and not

misleading

bull 143(3) ndashThe Auditorrsquos report shall also state (a) to (j) ndash SA 700 705 706 may gofor revision

bull 143(4) ndash Where any of the matters required to be included in the audit report underthis section is answered in the negative or with a qualification the report shall

state the reasons therefor

bull 143(9) - Every auditor shall comply with the auditing standards ndash 58 so

far pronounced by ICAI from SA 200 to SA 4410 ndash SA SQC SIA

7212019 Companies act Audit and accountspdf

httpslidepdfcomreaderfullcompanies-act-audit-and-accountspdf 1011

29-05-2014

10

Powers amp duties of Auditors and Auditing

Standards

bull 143 (14) -The provisions of this section shall mutatismutandis apply tomdash

ndash (a) the cost accountant in practice conducting cost audit

under section 148 or

ndash (b) the company secretary in practice conducting secretarial

audit under section 204

141 - Eligibility Qualifications amp

Disqualifications of Auditors

bull Disqualification ndash disappointment

bull Qualification ndash Innovation termination

bull Business Relationship ndash 141(3)(e)

bull Convicted by court ndash 141(3)(h)

bull 20 Companies Limit ndash as per 141(3)(g)

bull 1 Lakh ndash Lakshman Rekha

bull Any other form of entity engaged in 144 services

Eligibility Qualifications amp

Disqualifications of Auditors

ICAI Council Guidelines ndash 2008

For the above purpose the ldquospecified number of audit assignmentsrdquo means ndash

(a) in the case of a Chartered Accountant in practice or a proprietary firm of

Chartered Accountant thirty audit assignments whether in respect of

private Companies or other Companies

(b) in the case of Chartered Accountants in practice thirty audit assignments

per partner in the firm whether in respect of private Companies or other

Companies

Provided that out of such ldquospecified number of audit assignments the

number of audit assignments of public Companies each of which has a paid-up

share capital of rupees twenty-five lakhs or more shall not exceed ten

Appointment of Auditors

bull Appointment Re-appointment are known used terms

bull Retirement Rotation Ratification 5 year break or cooling period ndash

is new eligibility criteria

bull Common Partners same network of audit firms trade mark or Brand

bull Recently US house of representatives approved a Bill that prohibited

the US regulator from mandating audit rotation

bull 147(3) ndash Serious liability

bull refund the remuneration received by him to the company and

bull pay for damages to the company statutory bodies or authorities or to anyother persons for loss arising out of incorrect or misleading statements ofparticulars made in his audit report ndash [Caution Bankers will be First]

bull 147(1) ndash Contravention liable for prosecution ndash 1 year (officer)

bull 147(2) ndash Contravention liable for Fine (25K ndash 5L) ndash prosecution 1111

year amp Fine (1L ndash 25L) (Auditor) ndash see Proviso to 147(2)

bull To provide for insurance cost in the books of accounts of professional firms ndash the

best insurance is Professional Integrity

bull 147 use the word Auditor (includes CMACS) ndash yes ndash refer 143(14)

bull Council Guidelines No1-CA(7)022008 dated 8th August 2008 -

GUIDELINES FOR THE MEMBERS OF ICAI

bull New provision

bull 144 ndash Restriction ndash One side | Independence ndash Other Side

983109983160983152983148983137983150983137983156983145983151983150983098 983124 he term ldquodirectly or indirectlyrdquo shall include rendering of services by the auditormdash

1 in case of auditor being an individual either himself or through his relative or any other person

connected or associated with such individual or through any other entity whatsoever in

which such individual has significant influence or control or whose name or trade mark orbrand is used by such individual

2 in case of auditor being a firm either itself or through any of its partners or through its parent

subsidiary or associate entity or through any other entity whatsoever in which the firm or

any partner of the firm has significant influence or control or whose name or trade mark orbrand is used by the firm or any of its partners

Auditor not to render certain

services

7212019 Companies act Audit and accountspdf

httpslidepdfcomreaderfullcompanies-act-audit-and-accountspdf 1111

29-05-2014

11

a) accounting and book keeping services

b) internal audit

c) design and implementation of any financial information system

d) actuarial services

e) investment advisory services

f) investment banking services

g) rendering of outsourced financial services

h) management services and

i) any other kind of services as may be prescribed

Statutory Warning Say no to these services ndash Section 144

983107983144983137983152983156983141983154 983113983128 983085 983105983152983152983151983145983150983156983149983141983150983156 983137983155 983123983156983137983156983157983156983151983154983161 983137983157983140983145983156983151983154

983080983141983160983156983154983137983139983156 983142983154983151983149 983113983107983105983113 983107983151983157983150983139983145983148 983111983157983145983140983141983148983145983150983141983155 983085 983090983088983088983096983081

bull A member of the Institute in practice shall not accept the appointment as statutory

auditor of Public Sector Undertaking(s) Government Company(ies)Listed

Company(ies) and other Public Company(ies) having turnover of Rs 50 crores

or more in a year where he accepts any other work(s) or assignment(s) or

service(s) in regard to the same Undertaking(s) Company(ies) on a remuneration which in

total exceeds the fee payable for carrying out the statutory audit of the same

Undertakingcompany

bull In regard to taking up other work(s) or service(s) or assignment(s) of the

undertakingcompany referred to above it shall be open to such associate concern or

corporate body to render such work(s) or service(s) or assignment(s) so long as

aggregate remuneration for such other work(s) or service(s) or assignment(s)

payable to the statutory auditors together with fees payable to its associate

concern(s) or corporate body(ies) dodoes not exceed the aggregate of fee

payable for carrying out the statutory audit

983107983105983086 983111983119983120983105983116 983115983122983113983123983112983118983105 983122983105983114983125 | FCA AICWA ACS PGDOR PGDFM DISA (ICA) MPhil

Tax Partner Ms K Gopal Rao amp Co Chartered Accountants Chennai

Member ndash Southern India Regional Council of The Institute of Chartered Accountants of India

Email gkricaiorg | Mobile 98400 63269

7212019 Companies act Audit and accountspdf

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29-05-2014

10

Powers amp duties of Auditors and Auditing

Standards

bull 143 (14) -The provisions of this section shall mutatismutandis apply tomdash

ndash (a) the cost accountant in practice conducting cost audit

under section 148 or

ndash (b) the company secretary in practice conducting secretarial

audit under section 204

141 - Eligibility Qualifications amp

Disqualifications of Auditors

bull Disqualification ndash disappointment

bull Qualification ndash Innovation termination

bull Business Relationship ndash 141(3)(e)

bull Convicted by court ndash 141(3)(h)

bull 20 Companies Limit ndash as per 141(3)(g)

bull 1 Lakh ndash Lakshman Rekha

bull Any other form of entity engaged in 144 services

Eligibility Qualifications amp

Disqualifications of Auditors

ICAI Council Guidelines ndash 2008

For the above purpose the ldquospecified number of audit assignmentsrdquo means ndash

(a) in the case of a Chartered Accountant in practice or a proprietary firm of

Chartered Accountant thirty audit assignments whether in respect of

private Companies or other Companies

(b) in the case of Chartered Accountants in practice thirty audit assignments

per partner in the firm whether in respect of private Companies or other

Companies

Provided that out of such ldquospecified number of audit assignments the

number of audit assignments of public Companies each of which has a paid-up

share capital of rupees twenty-five lakhs or more shall not exceed ten

Appointment of Auditors

bull Appointment Re-appointment are known used terms

bull Retirement Rotation Ratification 5 year break or cooling period ndash

is new eligibility criteria

bull Common Partners same network of audit firms trade mark or Brand

bull Recently US house of representatives approved a Bill that prohibited

the US regulator from mandating audit rotation

bull 147(3) ndash Serious liability

bull refund the remuneration received by him to the company and

bull pay for damages to the company statutory bodies or authorities or to anyother persons for loss arising out of incorrect or misleading statements ofparticulars made in his audit report ndash [Caution Bankers will be First]

bull 147(1) ndash Contravention liable for prosecution ndash 1 year (officer)

bull 147(2) ndash Contravention liable for Fine (25K ndash 5L) ndash prosecution 1111

year amp Fine (1L ndash 25L) (Auditor) ndash see Proviso to 147(2)

bull To provide for insurance cost in the books of accounts of professional firms ndash the

best insurance is Professional Integrity

bull 147 use the word Auditor (includes CMACS) ndash yes ndash refer 143(14)

bull Council Guidelines No1-CA(7)022008 dated 8th August 2008 -

GUIDELINES FOR THE MEMBERS OF ICAI

bull New provision

bull 144 ndash Restriction ndash One side | Independence ndash Other Side

983109983160983152983148983137983150983137983156983145983151983150983098 983124 he term ldquodirectly or indirectlyrdquo shall include rendering of services by the auditormdash

1 in case of auditor being an individual either himself or through his relative or any other person

connected or associated with such individual or through any other entity whatsoever in

which such individual has significant influence or control or whose name or trade mark orbrand is used by such individual

2 in case of auditor being a firm either itself or through any of its partners or through its parent

subsidiary or associate entity or through any other entity whatsoever in which the firm or

any partner of the firm has significant influence or control or whose name or trade mark orbrand is used by the firm or any of its partners

Auditor not to render certain

services

7212019 Companies act Audit and accountspdf

httpslidepdfcomreaderfullcompanies-act-audit-and-accountspdf 1111

29-05-2014

11

a) accounting and book keeping services

b) internal audit

c) design and implementation of any financial information system

d) actuarial services

e) investment advisory services

f) investment banking services

g) rendering of outsourced financial services

h) management services and

i) any other kind of services as may be prescribed

Statutory Warning Say no to these services ndash Section 144

983107983144983137983152983156983141983154 983113983128 983085 983105983152983152983151983145983150983156983149983141983150983156 983137983155 983123983156983137983156983157983156983151983154983161 983137983157983140983145983156983151983154

983080983141983160983156983154983137983139983156 983142983154983151983149 983113983107983105983113 983107983151983157983150983139983145983148 983111983157983145983140983141983148983145983150983141983155 983085 983090983088983088983096983081

bull A member of the Institute in practice shall not accept the appointment as statutory

auditor of Public Sector Undertaking(s) Government Company(ies)Listed

Company(ies) and other Public Company(ies) having turnover of Rs 50 crores

or more in a year where he accepts any other work(s) or assignment(s) or

service(s) in regard to the same Undertaking(s) Company(ies) on a remuneration which in

total exceeds the fee payable for carrying out the statutory audit of the same

Undertakingcompany

bull In regard to taking up other work(s) or service(s) or assignment(s) of the

undertakingcompany referred to above it shall be open to such associate concern or

corporate body to render such work(s) or service(s) or assignment(s) so long as

aggregate remuneration for such other work(s) or service(s) or assignment(s)

payable to the statutory auditors together with fees payable to its associate

concern(s) or corporate body(ies) dodoes not exceed the aggregate of fee

payable for carrying out the statutory audit

983107983105983086 983111983119983120983105983116 983115983122983113983123983112983118983105 983122983105983114983125 | FCA AICWA ACS PGDOR PGDFM DISA (ICA) MPhil

Tax Partner Ms K Gopal Rao amp Co Chartered Accountants Chennai

Member ndash Southern India Regional Council of The Institute of Chartered Accountants of India

Email gkricaiorg | Mobile 98400 63269

7212019 Companies act Audit and accountspdf

httpslidepdfcomreaderfullcompanies-act-audit-and-accountspdf 1111

29-05-2014

11

a) accounting and book keeping services

b) internal audit

c) design and implementation of any financial information system

d) actuarial services

e) investment advisory services

f) investment banking services

g) rendering of outsourced financial services

h) management services and

i) any other kind of services as may be prescribed

Statutory Warning Say no to these services ndash Section 144

983107983144983137983152983156983141983154 983113983128 983085 983105983152983152983151983145983150983156983149983141983150983156 983137983155 983123983156983137983156983157983156983151983154983161 983137983157983140983145983156983151983154

983080983141983160983156983154983137983139983156 983142983154983151983149 983113983107983105983113 983107983151983157983150983139983145983148 983111983157983145983140983141983148983145983150983141983155 983085 983090983088983088983096983081

bull A member of the Institute in practice shall not accept the appointment as statutory

auditor of Public Sector Undertaking(s) Government Company(ies)Listed

Company(ies) and other Public Company(ies) having turnover of Rs 50 crores

or more in a year where he accepts any other work(s) or assignment(s) or

service(s) in regard to the same Undertaking(s) Company(ies) on a remuneration which in

total exceeds the fee payable for carrying out the statutory audit of the same

Undertakingcompany

bull In regard to taking up other work(s) or service(s) or assignment(s) of the

undertakingcompany referred to above it shall be open to such associate concern or

corporate body to render such work(s) or service(s) or assignment(s) so long as

aggregate remuneration for such other work(s) or service(s) or assignment(s)

payable to the statutory auditors together with fees payable to its associate

concern(s) or corporate body(ies) dodoes not exceed the aggregate of fee

payable for carrying out the statutory audit

983107983105983086 983111983119983120983105983116 983115983122983113983123983112983118983105 983122983105983114983125 | FCA AICWA ACS PGDOR PGDFM DISA (ICA) MPhil

Tax Partner Ms K Gopal Rao amp Co Chartered Accountants Chennai

Member ndash Southern India Regional Council of The Institute of Chartered Accountants of India

Email gkricaiorg | Mobile 98400 63269