Explaing the sections which covers the accounts & audit in the companies act

1. AUDITOR & ACCOUNTS
UNDER COMPANIES
ACT 2013
MVSK RUTHVIK

2. Topics of Discussion
• Introduction on CA-2013
• Accounts
• Important Definitions &Their Interpretations
• New aspects
• Auditors
• Key Changes & NewAdditions
• Areas which still require clarity
• What CA is required to do know???
• Conclusion

3. Introduction
• Companies Act 2013 (CA-2013) has bought a lot of
revolutionary changes relating to appointment,
disqualification, many other new terms of auditor.
• Penalties are something which got a special status and
makes a auditor go bankrupt.
• The 3’S behind CA 2013 to come into enforcement
• Satyam Computers
• Saradha Scam
• Sahara Scam

4. Comparative Analysis
COMPANIES ACT 1956
• 656 Sections
• 13 Parts
• 15 Schedules
COMPANIES ACT 2013
• 470 Sections
• 29 Chapters
• 07 Schedules

5. New Concepts in CA 2013
1. One Person Company
2. Women Directors
3. Corporate Social Responsibility
4. RegisteredValuers
5. Rotation of Auditors
6. Class Action
7. Dormant Company
8. FastTrack Mergers
9. Serious Fraud Investigation Officer (SFIO)

6. Provisions relating to Accounts
Section No Provision
Section 128 Books of accounts
Section 129 Financial Statements
Section 130 Re-opening of Books of accounts
Section 131 Voluntary Revision of Financial Statement or Board’s Report
Section 132 NFRA-National Financial ReportingAuthority
Section 134 Financial Statements & Board’s Report
Section 135 Corporate Social Responsibility

7. KEY DEFINITIONS
There have a some key changes relating to the
definitions:-
1. Free Reserves & NetWorth
2. Financial Statements
3. FinancialYear
4. Subsidiary company
5. Associate company

8. Section 128-Books of Accounts
• Every Company shall Prepare and keep at is registered
office, books of accounts and financial statements on
accrual basis for every financial year which give a true
and fair view of the state of affairs of the company.
• Books of accounts along with relevant vouchers shall be
kept for a period of at least 8 years from immediately
preceding the financial year.

9. Section 130-Reopening of Books of accounts
• Reopening of books of accounts and recast financial
statements, if application is made to CG, IT Authorities,
SEBI and other statutory regulatory body if any, and an
order is made by court of competent jurisdiction or
tribunal to that effect that-
• Earlier accounts were prepared in a fraudulent manner
• Affairs of the company were mismanaged during the
relevant previous period
• This revision is required to disclose in Board’s report of the
financial year in which the revision is made and such a
revision shall not be made or filed more than once in a
financial year.

10. Section 132-National Financial Reporting Authority (NFRA)
• The Central Government has introduced a new regulatory
authority named as National Financial Reporting Authority
(NFRA).
• The Authority Shall make recommendations to central
Government on Accounting and auditing policies monitor
and enforce the compliance with accounting and auditing
standards and oversee the quality of the services provided
by the professionals.
• It has right to investigate or by reference made by the CG for
bodies corporate or persons, into the matters of
professional misconduct committed by members or firm of
Chartered Accountants, registered under the Chartered
Accountants Act,1949

11. Section 135 Corporate Social Responsibility(CSR)
The Companies Act mandates the CSR guidelines for the following
companies:-
1. Having Net worth of INR 500 crores or more (or)
2. Turnover of INR 1000 crores or more (or)
3. Net profit of INR 5 crores or more.
• Such a company shall constitute a CSR Committee of Board
Comprising of 3 or more directors ,1 of whom shall be an
Independent Director, the committee shall formulate a policy for
the activities specified in ScheduleVII of the CompaniesAct 2013.
• 2% of the average net profits of immediately preceding 3 years
shall have t be spent, and if not spent, an explanation with reasons
thereof shall be required to be given in the director’s report.

12. CHANGES RELATING TO
AUDITORS

13. Chapter-X Audit & Auditors ranging from section 139 to 148 has
into act from 1st April 2014.
Companies
Act, 2013
Section Description
Section 139 Appointment of Auditors
Section 140 Removal, Resignation of auditor and giving of special notice.
Section 141 Eligibility, qualifications and disqualifications of auditors.
Section 142 Remuneration of auditors.
Section 143 Powers and duties of auditors and auditing standards.
Section 144 Auditor not to render certain services.
Section 145 Auditors to sign audit reports, etc.
Section 146 Auditors to attend general meeting.
Section 147 Punishment for contravention.
Section 148 Central Government to specify audit of items of cost in respect of certain
companies. (Cost Audit)

14. Key Changes
• A firm/LLP can partner with non-CA’s and still be appointed
as auditor.
• Section 144 specifies services which auditor shouldn’t
provide.
• Acts of relative included in dis-qualification of auditor.
• Business relationship with a company is bought within the
ambit of disqualification of an auditor (whether direct or
indirect)
• Mandatory Compliance of Standards onAuditing
• Fraud Reporting – Section 143(12)

15. Section 139: Appointment of Auditor
• Every Company has to appoint the auditor for period of 5 yrs
i.e. till end of 6th AGM
• Company will intimate the auditor about his appointment &
Now it is duty of the company to File form ADT-1 relating to
auditor appointment.
• In every Annual General Meeting, the appointment of
Statutory Auditors should be ratified. If ratification of
appointment is not made by the members in the Annual
General meeting, the Board shall appoint another
individual/Firm as Auditors as per procedures laid down under
the Act.

16. Procedure of appointment if Companies have
audit committee
• Where a company is required to constitute an Audit
Committee under section 177, all appointments, including
the filling of a casual vacancy of an auditor under this
section shall be made after taking into account the
recommendations of such committee
• It is Duty of Audit Committee to go through the process
of selection of Auditors and then recommend to the
Board which in turn recommends to the Members for
consideration in the AGM.
• If the Board disagrees the recommendation of the Audit
committee, it shall refer back again to the said
Committee citing reason for disagreement and
recommending reconsideration.

17. Rotation of Auditors
• New Concept Where many Chartered Accountants are in
favour & against too. But Law has to be followed…..
• Rotation of Auditors is Mandatory only for
• listed companies
• unlisted companies having paid up share capital of Rs. 10
crores or more
• all private limited companies having paid up share capital of
Rs. 20 crores or more
• all other companies (excluding OPC & small companies)
having paid up share capital below threshold limit but
having public borrowing financial institutions, banks or
public deposits of Rs. 50 crores or more.

18. • An individual is eligible to be appointed as auditor only for one
term of 5 consecutive years while a firm can be appointed as
auditor of the same company for two terms of 5 consecutive
years i.e 10 years.
COOLING PEROID:-
• An individual or audit firm as the case may be who/which has
completed the above mentioned terms shall not be eligible
for re-appointment as auditor in the same company for 5
years from the completion of such term.
• Companies incorporated prior to 1st April 2014 have been
given 3 years of moratorium period to ensure compliance with
the act.

19. Section 140: Removal & Resignation
• Auditor can be removed by passing a Special resolution after
obtaining prior approval of Central Govt. Application to CG in
within 30 days of passing board resolution.
• Removal of auditor before 5 years would be considered as
removal from his office ,so strict formalities have to
followed to protect the interest of auditor.
• In case an Auditor resigned within his period of 5 years, he
has to file (ADT-3) with ROC within 30 days of removal
stating the reasons why resigned else he would punishable
with a fine of not less than Rs. 50,000 upto Rs. 5,00,000.

20. Section 141:Eligibility of Auditor
• Only a Practising Chartered accountant Can be
appointed as Auditor for a company.
• It seems Firm/LLP can contain partner’s who are Non-
CA’s. The introduction of LLP as an auditor and ability
of a firm/LLP to operate with partners who are not
Chartered Accountants is a welcome change and in line
with international practices

21. Disqualification
• Body corporate other than LLP
• A person who is a partner or who is in the employment of an
officer or employee of the company
• A person who, or his relative or partner
• Holds a security exceeding Rs. 1,00,000 (Face value)
• Indebtness to company exceeding Rs.5,00,000
• Given guarantee in connection with the indebtness of any 3rd
party to company/subisdary/associate in excess of Rs.1,00,000
• A person or a firm who, whether directly or indirectly, has
business relationship with the company/associates/subsidaries
• Having a relative as director/KMP in such companies

22. Ceiling Limit
• a person who is in full time employment elsewhere or a
partner of a firm holding appointment as its auditor as on
that date of appointment shall not be auditor of more than
20 Companies ( Includes Public + Private).
• However, the MCA Notification on 5th June 2015 brought a
huge relief to many CA Firms that auditor ceiling limit
excludes one person companies, dormant companies, small
companies and Private limited companies who paid up share
capital is less than 100 crores.

23. Section 142: Remuneration
• The BOD may fix the remuneration for first auditor.
Subsequently the remuneration shall be fixed in AGM.
• Section 142 requires the Company to quantify the
remuneration in the General Meeting.
• But as per the new act, the remuneration in addition to
the fee payable to an auditor, include the expenses, if
any, incurred by the auditor in connection with the audit
of the company and any facility extended to him but does
not include any remuneration paid to him for any other
service rendered by him at the request of the company.

24. Section 143:Powers & Duties of Auditor
1. Right to access of books of accounts, documents, vouchers
relating to the company at all times.
2. Report to the company on the accounts examined by him that are
required to be laid before the company in general meeting
3. Auditor should report on matters relating to compliance with the
accounting & Auditing standards, disqualification relating to the
director, reporting the efficiency of the internal financial controls.
4. In case of branch audit, opening the report from such branch
auditor if such branch is out of India
5. Reporting of the fraud committed by the employees to audit
committee beyond certain limit and beyond such limit to the
central govt. Such limit is yet to be notified by the central
government.

25. Section 144: Other Services by Auditor
• New concept introduced in Companies act 2013 stating
services which the auditor are not entitled to provide. Auditor
can provide such other services as approved by BOD.
Services which an auditor cannot provide:-
1. Accounting and Book keeping services
2. Internal audit
3. Design and implementation of any financial information
system
4. Actuarial services
5. Investment advisory services & Investment banking services
6. Rendering of outsourced financial services
7. Management services any other kind of services as may be
prescribed

26. Section 145-Auditor to Sign report
• The person appointed as an auditor of the company shall
have to sign the audit report or certify any document in
accordance with the section 141 of the act.
• The qualifications, observations or comment on
functioning of the company in the auditor’s report shall
be read before the general meeting
Section 146-Auditor to attend AGM
All the notices and communications related to AGM shall be
forwarded to the auditor. The auditor shall attend AGM
either himself or through representative and have the right
to be heard at the meeting.

27. Section 147-Punishment for Contravention
Company-
Punishable with fine (Rs. 25,000 to Rs. 5,00,000).
Officer in charge-
Punishable with imprisonment maximum for 1 year or with
fine (Rs.10,000 to Rs. 1,00,000).
Auditor-
Punishable with fine (Rs. 25,000 to Rs. 5,00,000). If an auditor
has contravened such provisions knowingly or willfully with
the intention to deceive the company or its shareholders or
creditors or tax authorities, he shall be punishable with
imprisonment for a term which may extend to one year and
with fine (Rs. 1,00,000 to Rs. 25,00,000).

28. Conclusion
The companies’ act 2013 has bought a few drastic changes
which require the attention of the auditors so as to ensure
compliance with them. The some key definitions needs to be
relooked before we advise the client and we should keep
ourselves updated on daily basis as the notifications and
circulars been released by MCA on various aspects which bring
a lot amount of clarity.