Accounts, Audit, Auditors and CSR · Accounts, Audit, Auditors and CSR. 1/30/2014 Definitions...
Transcript of Accounts, Audit, Auditors and CSR · Accounts, Audit, Auditors and CSR. 1/30/2014 Definitions...
1/30/2014
Accounts, Audit, Auditors and CSR
1/30/2014
Definitions
Company A Company BAssociate of
Significant Influence
Control of ≥ 20% Share
Capital
Control of Business
Decisions Under AgreementOR
Associate Company is not a subsidiary, but includes a joint
venture company
• Associate Companies to be disclosed in annual report
• Definition exists under AS – 18, now brought under
Companies Act
• RPT dealings extended to Associate Companies
Associate Company – Section (6)
through
At variance with AS
18 definition
Monitoring?
Discussion Point
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Definitions
Subsidiary – Section 2(87)
Control through one half of the total
share capital either at its own or together
with one or more of its subsidiary
Holding Co
Subsidiary Subsidiary
Subsidiary
20%
51%
20%20%
51%
However
Layers of
subsidiaries
also restricted
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Definitions
Financial Statement
Balance Sheet
Includes
explanatory
notes
Profit & Loss
Account
Cashflow
Statement
Statement of
changes in Equity
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Definitions
Financial Year – Section 2(41)
Incorporated before 1st Jan
31st March of Current Year 31st March of next Year
Yes No
• Transition period of 2 years for existing Cos
• Cos having foreign holding or subsidiary cos can follow different year with prior approval of
tribunal
Appointment for a term of 5 years and rectification in every AGM
Requirement for rotation of Auditor introduced.
Applicable to all companies except small companies and one person company
Rotation of Auditor after two terms of 5 consecutive years.
Cooling period of 5 years before the reappointment of the same firm.
Transition period of three years for complying the requirement.
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Rotation of Auditors
Whether rotation shall bring independence?
Whether rotation is desirable when no public interest is involved?
Exposure to two audit firms- whether in the interest of company?
Discussion Point
Company
Holding Co
Subsidiary
AssociateF Subsidiary
Auditor PartnerRelative OR OR
Securities Indebted Guarantee
Person FirmOR
Business Relation
Direct
Indirect
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Disqualification of Auditors
Relative
Person
KMPDirector
Company
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Disqualification of Auditors
Actuarial
services
Investment
advisory
services
Management
services
Internal Audit
Design and
implementation
of any financial
information
system
Rendering of
outsourced
financial
services
Accounting
and book
keeping
services
Investment
banking
services
Restriction for the auditors to undertake following specialized services by himself or his
subsidiary or associate company or any other form of entity
Whether following services may be undertaken ?
o Tax consultancy and representation
o Project financing assignment
o Restructuring assignment
Restrictions for the Auditors
Audit Report to contain:
• Qualification, reservation or adverse
remark and reasons thereof
Whether company has internal controls
and operating effectiveness of internal
financial control system
• Report on Cash Flow and such other
matters as prescribed
• Reasons for required matters not included
or included with qualification
• Qualification, observation or comments on financial transactions or matters mentioned in
Audit Report, which have adverse effect on functioning of Company, shall be read in GM
• Any fraud detected immediately to report to CG
Auditors Report
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Fine may be imposed from Rs. 25,000/- to Rs. 5,00,000/-
Appointment, Reporting, Signing of audit report
Criminal liability of imprisonment upto 1 year
Fine from Rs. 1,00,000/- to Rs. 25,00,000/-
Contravention has been made knowingly and willfully
Further an auditor convicted as above shall be liable to:-
Refund the remuneration received from the company.
Pay for damages for loss arising out of incorrect/misleading statement of particulars made in the
audit report.
Punishment for Contravention
Books of accounts or other relevant papers may be kept in electronic
mode.
Books of accounts to be kept for preceding 8 financial years.
Consolidated financial statement to be prepared by all companies
(Including private limited companies) having subsidiary. For this purpose
the word subsidiary shall include Associate company and Joint Venture.
Disclosure in the financial statement any deviation from the Accounting
standards, the reasons for such deviation and financial effect, if any,
arising out of such deviation.
Statutory recognition of CFO
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Maintenance of Books of Accounts
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Every Listed
Company
Every public company
having paid-share capital
of Rs. 10 crores or more
Any other public company
having borrowings from
banks/financial institutions/
deposits of Rs. 25 crores
or more
Mandatory Internal Audit
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Re-opening and Revision - Sec 130 &131
Application for re-opening of books of accounts or recasting of financial statement can be
made by in case financial statements prepared in fraudulent manner/ affairs mismanaged
CG
IT Authority
SEBI
Any other statutory body or authority or person concerned
Order by Tribunal or Court of competent jurisdiction
Tribunal or Court to give notice to authority making application and to consider their
representation before passing order
Re-casted or revised accounts shall be final
Man
dato
ry
No time limit
Cascading effect
Whether Income Tax return to be revised
Imp
licati
on
s
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Re-opening and Revision - Sec 130 &131
Voluntary revision of financial statement by BOD permitted, subject to Tribunal approval,
in case financial statement not prepared as per Companies Act / AS
After receiving approval from Tribunal, BOD may prepare revised Financial Statement or
Board’s Report for preceding 3 FYs
Tribunal to give notice to CG and IT Authorities before allowing revision in Financial
Statement or Board’s Report
Detailed reasons for revision in Financial Statement or Board’s Report to be disclosed in
Board’s Report for FY in which the revision is being made
Vo
lun
tary
Any Qualification by auditor may trigger re-casting
Reopening does not mean correction
Imp
licati
on
s
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Depreciation
No Separate depreciation rate including for extra shift
Depreciation of assets over its useful life
Depreciable Amount = Amount of an Asset or amount substituted for cost Less its
residual value
Useful life has been differently prescribed in Schedule II to Companies Act, 2013
and Schedule XIV of Companies Act, 1956
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CSR – Sec 135
Networth ≥ 500 Crs or
Turnover ≥ 1000 Crs or
Net Profits ≥ 5 Crs
CSR Committee to beconstituted (3+ Dir incl. at least1 ID)
Committee shall formulate andrecommend CSR policy andamount of expenditure as wellas monitor CSR activities (CSRpolicy on web)
Preference to local areas inwhich the company operates
Areas specified in Schedule VII
CSR spend of at least 2% of avg. net
profits made during 3 immediately
preceding FYs
COMPLY
OR
EXPLAIN
To promote welfare Initiatives
• Applicable to all types of companies including private
companies
• Net profits before tax to be considered
• Applicable from F/Y 14-15
• Income tax Act does not provide any deduction so far
• Surplus Income generated out of CSR activities not
part of business profits of company
• No penalty for noncompliance of the provision
CSR – Promoting Welfare Initiatives
• CSR Activities to be undertaken as projects or
programmes
• Excluding activities undertaken in pursuance of the
normal course of business of a company
• In the area nearby the operations of the company
• May implement the same through trust/society set up by
company or otherwise having track record of three years
• Activities to be undertaken within India
• Activities not exclusively for the benefit of employees or
their family members
• Nature of projects/programmes to be covered for
eradicating extreme hunger and Poverty, for promotion
of education…..etc as given in schedule VII
CSR – Promoting Welfare Initiatives
• Objective para entirely different from the manner
of implementation of CSR prescribed
• Rationale of CSR spend – Whether another tax?
• Amounts not spent in earlier year whether to be
accumulated ?
• Whether provision for threshold limit to be made
in the books
• Whether fund to be created
• Whether applicable for FY 2013-14
CSR – Issues
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Thank You