Accounts of company - covers the section 128 - 133 and section 138 comes for around 5 marks in the PDF

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covers the section 128 - 133 and section 138 comes for around 5 marks in the actual exam ...

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- Comprehensive Module For CA IPCC Auditing & Assurance

C11 – Accounts of a Company

Chapter 11 Accounts of Company Section 128

LOCATION, MANNER, PERIOD OF MAINTENANCE AND INSPECTION OF BOOKS OF ACCOUNT - Section 128

Section 129

Section 129 Section 134

Disclosures relating to conservation of energy etc. (Conservation of energy, Technology absorption, Foreign exchange earnings and outgo) Other matters in Board’s Report Board report in case of One-person company Signing of board report

LOCATION, MANNER, PERIOD OF MAINTENANCE AND INSPECTION OF BOOKS OF ACCOUNT - Section 128 Every company shall prepare and keep •

books of account and

•

ther relevant books and papers and

•

financial statement (hereinafter referred to as 'books of account etc.')

for every financial year.

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C11 – Accounts of a Company

Method of preparation The books of account etc. must give a true and fair view of the state of the affairs of the company, including its branch office(s); explain the transactions effected at the registered office and its branch office(s); be prepared on accrual basis; be prepared according to the double entry system of accounting.

(a) (b) (c) (d)

Maintenance of books of account in electronic form The books of account and other relevant papers may be kept in electronic mode in such manner as may be prescribed. Rule 3 of the Companies (Accounts) Rules, 2014 prescribes the following manner The books of account and other relevant books and papers maintained in electronic mode shall remain

(a)

Loca (b) All or any of the books of account and other relevant papers may be kept at such other place in India as the Board of directors may decide. In such a case, the company shall within 7 days of the decision of the Board, file with the registrar a notice in writing giving the full address of that other place. (c) Where a company has a branch office (whether in India or outside India), the books of account relating to the transactions effected at the branch office may be kept at the branch office. But, proper summarized returns must be periodically sent by the branch office to the company at its registered office or the other place, if any, where the books of account etc. are kept in pursuance of the decision taken by the Board of directors.

Preservation of books of account Every company shall preserve in good order the books of account together with the relevant vouchers. The time period of preservation shall be – (a)

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not less than 8 financial years immediately preceding the relevant financial year; or

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- Comprehensive Module For CA IPCC Auditing & Assurance (b) (c)

C11 – Accounts of a Company

if the company has been in existence for less than 8 financial years, then, for the entire period of its existence. Where an investigation of the company is ordered, CG may direct that the books of account may be kept for such longer period as it may deem fit.

Persons responsible and Penalty Managing director Whole-time director in charge of finance Chief Financial Officer Any other person of a company charged by the Board with such duty

(i) (ii) (iii) (iv)

Penalty

r at the t during

horized

ection all

financial tions as

a shall be gistered

tor, the director shall furnish a request to the company setting out the full details of the financial information sought and the period for which such information is sought. (c)

The company shall produce such financial information to the director within 15 days of the date of receipt of the written request.

(d)

The financial information shall be sought for by the director himself and not by or through his power of attorney holder or agent or representative.

FINANCIAL STATEMENT

(Sec. 129 of the Companies Act, 2013)

Basics 1.

The financial statements shall give a true and fair view of the state of affairs of the company.

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3. 4.

5.

C11 – Accounts of a Company

The financial statements shall comply with the accounting standards notified u/s 133. If the financial statements do not comply with the accounting standards, the company shall disclose in its financial statements, a. the deviation from the accounting standards; b. the reasons for such deviation; and c. the financial effects, if any, arising out of such deviation. The financial statements shall be in the form or forms as may be provided for different class or classes of companies in Schedule III. Where a company has one or more subsidiaries, it shall also prepare a consolidated financial statement of the company and of all the subsidiaries in the same form and manner as that of its own. For this purpose, the term 'subsidiary' shall include associate company and joint venture.

Non-app Nothing con (a) (b) (c) (d)

g

Laying of At every AG

Statement co The compan

s

of the finan Exemption e

c e

'Notes' to be a part of financial statement For the purposes of Sec. 129, any reference to the financial statement shall include any notes annexed to or forming part of such financial statement, giving information required to be given and allowed to be given in the form of such notes under this Act.

Persons responsible and Penalty Persons responsible (i) (ii) (iii) (iv) (v)

Managing director Whole-time director in charge of finance Chief Financial Officer Any other person of a company charged by the Board with such duty all the directors, in the absence of any of the officers mentioned above

Punishment for contravention (i) (ii) (iii)

Imprisonment upto 1 year; or Fine: Minimum Rs. 50,000; Maximum Rs. 5,00,000. Both.

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C11 – Accounts of a Company

ACCOUNTING STANDARDS Section 133 of the Companies Act, 2013 The power to prescribe the accounting standards Vests with CG.

Stages in prescribing accounting standards At the first stage, ICAI recommends the Standards of Accounting. At the second stage, these Standards of Accounting shall be examined by the National Financial

(i) (ii) (iii)

Positi CG ma the rec of the

FI

The fin before

The fin by — (i) (ii) (iii) (iv) shall be signed by one director only.

Submission to the, auditor The financial statement, including consolidated financial statement, if any, shall be submitted to the auditor after they have been approved and signed .

Attachment of auditors' report The auditors' report shall be attached to every financial statement.

Contents of Board's Report Board's Report shall be attached to the financial statement laid before the company in general meeting. The Board's Report shall include the following matters: 1. 2. 3. 4.

The extract of the annual return Number of meetings of the Board. Directors' Responsibility Statement (later) A statement on declaration given by independent directors

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6. 7. 8. 9. 10. 11. 12.

C11 – Accounts of a Company

Explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made — a. by the auditor in his report; and b. by the company secretary in practice in his secretarial audit report. Particulars of loans, guarantees or investments u/s 186. Particulars of contracts or arrangements with related parties. The state of the company's affairs. The amounts, if any, which it proposes to carry to any reserves, The amount, if any, which it recommends should be paid by way of dividend. The details about the policy developed and implemented by the company on corporate social responsibility initiatives taken during the year, Such other matters as may be prescribed

Di go It Th 1.

2.

3.

4.

5.

In the case of a listed company, the directors' responsibility statement shall disclose as to whether the directors, had laid down internal financial controls to be followed by the company and whether such internal financial controls are adequate and were operating effectively. The term "internal financial controls" means the policies and procedures adopted by the company for ensuring a) b) c) d) e)

6.

the orderly and efficient conduct of its business, including adherence to company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.

The directors' responsibility statement shall disclose as to whether the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and whether such systems were adequate and operating effectively.

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C11 – Accounts of a Company

Disclosures relating to conservation of energy etc. As per Rule 8(3) of the Companies (Accounts) Rules, 2014, the Board's Report shall contain the following information and details: Conservation of energy 1. 2. 3.

The steps taken or impact on conservation of energy. of energy The steps taken by the company for utilizing alternate sources of energy, The capital investment on energy conservation equipment.

Technology absorption 1. The efforts made towards technology absorption.

For

Rule (i) (ii) (iii) (iv) (v)

(v) (vi) (vii)

The details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future. The details in respect of adequacy of internal financial controls with reference to the Financial Statements.

Board's Report in case of One Person Company In case of a One Person Company, Board's Report shall mean a report containing explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report.

Signing of Board's Report 1.

2.

The Board's report and any annexures thereto shall be signed by (i) the chairperson of the company, if he is authorized by the Board; or (ii) at least 2 directors, one of whom shall be a managing director, if the chairperson of the company is not so authorized. In case there is only one director, the Board's report and any annexures thereto shall be signed by such director

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C11 – Accounts of a Company

For Notes

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C11 – Accounts of a Company

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C11 – Accounts of a Company

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- Comprehensive Module For CA IPCC Auditing & Assurance C11 – Accounts of a Company REQUIREMENT FOR INTERNAL AUDIT (Section 138 of the Companies Act, 2013)

138. (1) Such class or classes of companies as may be prescribed shall be required to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company. (2) The Central Government may, by rules, prescribe the manner and the intervals in which the internal audit shall be conducted and reported to the Board. As per Rule 13 of the Companies (Accounts) Rules, 2014, following class of companies shall be covered u/s 138: (a) (b)

(c)

• • •

The in A ‘Cha The Au the sc

Section 130 its financia authorities, concerned • •

the relevant earlier accounts were prepared in a fraudulent manner; or the affairs of the company were mismanaged during the relevant period, casting a doubt on the reliability of financial statements.

Provided that the court or the Tribunal, as the case may be, shall give notice to the Central Government, the Income-tax authorities, the Securities and Exchange Board or any other statutory regulatory body or authority concerned and shall take into consideration the representations, if any, made by that Government or the authorities, Securities and Exchange Board or the body or authority concerned before passing any order under this section.

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