Company Accounts Internal Audit Corporate Social Responsibility Agenda for Today’s Discussion 1...

Company Accounts

Internal Audit

Corporate Social Responsibility

Agenda for Today’s Discussion

1By- CA Ankita Hudiya

By- CA Ankita Hudiya

Section 128- Books of Accounts

Section 129- Financial StatementsSection 130- Reopening of Accounts on Courts/ Tribunal Orders

Section 131- Voluntary Revision of Financial Statements & Boards Report

Section 132- Constitution of NFRA (National Financial Reporting Authority)

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6Section 133- Central Govt. to Prescribe Accounting Standards

Sections to be Covered

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Section 134- Financial Statements, Board Reports

Section 135- Corporate Social Responsibility

Section 136- Right of Member to copies of audited Financial Statements

Section 137- Copy of Financial Statement to be filed with Registrar

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11Section 138- Internal Audit

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By- CA Ankita Hudiya 4

Section 128- Books of Accounts -Already existing provisions

Books of accounts to kept at Registered Office.

Can be kept at other place other than Registered Office-Pass

resolution in BM & intimate the same to ROC within “7” days of such resolution.

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-New provisions

Books of accounts can be kept in electronic form.

Records of Branch to be updated PERIODICALLY at head office.

FORM AOC -5 to be filled if books kept at some other place other than registered office.

Central Government can direct maintenance Of BOA for more than 8 years.Penalties for any offence under this section has been

increased terribly.

Section 128- Books of Accounts

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The word “Balance sheet & Profit & Loss” has now been replaced

with Financial Statements

Now the section goes as under:

The Act requires EVERY COMPANY to prepare its financial statements at the end of the “financial year” so as to give a TRUE & FAIR VIEW of the state of affairs of the company.

Financial Statements to cover:Balance sheet Profit and Loss AccountCash Flow Statements for the financial yearStatement of Changes in EquityAny explanatory note annexed to or forming part of, any document referred to in sub clause (i) to (iv)

Section 129- Financial Statements


Contd: ……Section 129- Financial Statements

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Preparation of Consolidated financial statements of the company & all of its subsidiaries

Subsidiaries to include Associate Company & Joint Venture

A separate statement containing the salient feature’s of the financial statement of the subsidiary /subsidiaries shall also be presented in form

AOC 1

Subsidiary must exist till the END of the financial yearDeviation from accounting standards in its financial statements is to be disclosed

Penalties for any offence under this section has been increased terribly.


Company accounts –Fraudulent manner

Affairs of the Co. are mismanaged, casting a doubt on the reliability of the financial statements

Court or tribunal

Central Government, Income tax Authorities, SEBI , or any other Statutory or Regulatory authority

Reopen Books of Accounts

Orders/directs

OR

Section 130- Reopening of Accounts on Courts/ Tribunal Orders


Section 131- Voluntary Revision of Financial Statements & Boards Reports

Non compliance with section 129(Prep of Financial Statements)

Non compliance with section 134(Board reports & Financial Statement)

Can revise F.S or B.R for any of the preceeding

“3” financial years

**Note-Revision can be done just once

OR


The Central Government may prescribe the accounting standards or any addendum there to as recommended by ICAI and NFRA

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•Make recommendations to CG

•Oversee the Quality of service provided to professionals with who use such compliance.

•Have the same powers as are vested in a civil court

•Monitor & enforce the compliance of the same

•Will have power to carry on investigation on its own or on order of CG

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Section 132- Constitution of NFRA (National Financial Reporting Authority)

NFRA Will recommend Central Government in forming Auditing & Accounting Standards

Section 133- Central Govt. to Prescribe Accounting Standards


Where professional or other misconduct gets proved

“PENALTY”

If Individual- •Min Rs 1 Lakhs

•Max. - 5 times fees Received

If Firm- •Min Rs 10 Lakhs •Max. 10 times fees Received•Debarring the Member from Practice for Min 6 Months or Max 10 Years!!!!!!!!!!


Section 134-Financial Statements

Signing of Financial Statements:

As per section 134(1),

Financial Statement is required to be signed by:

the Chairperson of the Company where he is Authorised by the Board OR

by Two Directors out of which one shall be managing director,

the Chief Executive Officer, if he is a Director in the Company,

the Chief Financial Officer , and

the Company Secretary of the company, wherever they are appointed.

* In the case of a One Person Company, the Financial

Statements: is

required to be signed only by One Director.

Section 134- Financial Statements, Board Reports

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Contents of Directors ReportThe following contents are mandatory to mention in the Director Report

1. Extract under section 92 i.e. extracts of the Annual Return.2. Number of meeting of Board of Directors.

3. Directors Responsibility Statement.

4. Disclosure in the Board Report regarding the Declaration of independent directors.

5. Matters as per section 178 of the act, if applicable: committee of Nomination, Remuneration and stakeholders relationship committee

6. Reservation and qualification on Auditor Report and Secretarial Report.7. Details of Loans and Guarantee under SECTION 186#

8. Particulars of Contract and arrangement under SECTION 188 (Related Party

Transaction).

9. State of Company Affairs.10. Reserves.11. Dividend.12. Material Changes.13. Conservation, Technology etc.14. Foreign Exchange.

15.Risk Management: the development and implementation of risk management policy.16. CSR.

17. Formal Annual evaluation: performance of the Board and its committee and its individual directors. This clause shall be applicable only listed company or prescribed public limited company.

18. other matter.

*In case, company has intention to disclose other matter, it may so.

# The details of Loans, Guarantee and investment shall be mentioned in the Director Report as per provisions of Section 186 of the Act .



Signing of Board

ReportAs per section 134(6),

Board Report shall be signed by ;

By its Chairperson , if authorized,

By at least two Directors one of whom shall be Managing Director or by the Director where there is one Director.


Penal provisions of section 134

The Company shall be punishable

FINE < Rs 50,000 but may extend to Rs 25,00,000

&EVERY OFFICER in Default shall be Punishable with IMPRISONMENT for a term which may extend to 3 years or with fine which shall not be less than Rs 50,000 but which may extend to Rs 25,00,000 or with both.

+

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Copy of Financial Statements including Consolidated Financial Statements, Auditor Report , any other document annexed or attached thereto which are to be laid before the AGM shall be sent to the member and debenture

trustee Before TWENTY ONE DAYS of the meeting

Mode of communication:a. Listed companiesb. Public companies

having a Net Worth of Rs One Crores or more

Having a Turnover of Rs 10 Crores or more

c. Others can send by registered post, speed post, courier or electronic mode

Section 136- Right of Member to copies of audited Financial Statements

Can send copies by electronic mode

OR

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Section 137- Copy of Financial Statement to be filled with Registrar

Companies other than OPC

In case of One Person Company

AGM Held Within 30 days of AGM

AGM NOT Held

Within 30 days of last date before which the AGM should have been held

AGM Adjourned Within 30 days of Adjourned AGM

Within 180 days from the Closure of

FYCompanies to

file form AOC 4

Section 135- Corporate Social Responsibility

Net worth of Rs.500

Crores or more in any FY

Turnover of Rs.1000 Crores or more in any FY

Corporate Social

Responsibility

Net Profit of Rs 5 Crores

or more in any FY

Every Year mandatorily has to spend:

2% * (Average Net profit of the company made during the immediately 3 preceeding financial years) on CSR.

OROR

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Net Profit

Shall exclude• any profit arising from any Overseas Branch or Branches of the Company whether operated as a separated Company or otherwise.

• any Dividend received from other companies in India covered & complying with the provisions of Section 135.

*Profit Calculated as per Provisions Companies Act,1956 shall not be

required to be recalculated.

Steps for CSR Activities

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To set up CSR Committee

Company to Formulate &

Monitor

Company to meet

Board’s Report

Min no of members: 3, out of which one shall be independent director.For PVT companies without independent director can form committee without these directors

Company’s

C S R PolicyTwice a Year Disclose

Committee’s and C S R

Policy

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Activities undertaken shall Exclude the following:

Expenditure in normal course of business.

Programmes & activities that benefit of ONLY the employees and their family.

Programmes or activities carried out as a PRECONDITION for setting up a business.

Anything done to fulfill a CONTRACTUAL OBLIGATION undertaken by a company.

Fulfillment of Required Regulations.


Rule 4 : Companies (Corporate Social Responsibility Policy) Rules 2014

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Objective- to provide guidance on Recognition,

Measurement, Presentation &

Disclosure of expenses on activities relating to CSR.Issued On May 15, 2015


Guidance Note on Accounting for expenditure on C S R Activities

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Making Contribution to the funds as specified in

SCHEDULE VII of the Act,

Through a Registered Trust,

On its Own

Treatment of such expenditure: Charge to Profit & Loss Account


CSR obligations can be met in the following ways:


Disclosure for the amount spent on C S R

Amount of CSR Expenditure - To be disclosed in Notes to Statement

of P&L A/c

Other Things to be disclosed in NOTES:Gross Amount required to be Spend by the Co. during the yearAmount Spent during the year on

- Construction, Acquisition of any Asset

- On purpose other than above (Revenue Expenditure)

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Shortcomings Of C S R

1. Law does not stipulate any penalties for non- compliances for the same

2. The act states that the amount will be spent in local area where business is located- What about rural areas?

Suggestion: Spend 50% in local area of business and 50% in rural area


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Questions that arise on the same?????????????1. What if the company spends less than 2% of the Average Net Profits?

2. What if the company spends more than 2% of the Average Net Profits?

3. What if during incurring such Expenditure, it gives rise to an ASSET ? Whether to be considered in companies B/S?4.What treatment to be given if Company supplies goods manufactured by itself or renders services provided by itself-When is the same to be Accounted in Books?


5.What if a company receives a grant for carrying out such CSR activities?

6. What if company derives Income from such CSR activities?7. Whether Expense of CSR can be claimed under the Provisions of Income Tax?

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Section 138 read with rule 13 of the Companies(Accounts) Rules 2014

Following class of Companies shall appoint an internal Auditor Compulsorily:

1. Every Listed Company

2. Every Unlisted Company

a.) Paid up Share Capital of Rs.50 Crores or more OR

b.) Turnover of Rs.200 Crores or more OR

c.) Outstanding loans or borrowings from Banks or PFI exceeding Rs 100 Crores or more OR

d.) Outstanding deposits of Rs.25 Crores or more

3. Every Private Company

a.) Turnover of Rs.200 Crores or more OR

b.) Outstanding loans or borrowings from Banks or PFI exceeding Rs 100 Crores or more

Section 138- Internal Audit

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For any Queries please contact us at

CA Ankita Hudiya | ACA |

|Contact Details||R O| B-14, Jhilmil Colony, Delhi-110095||B O| FF-76 & FF-80, Ansal Fortune Arcade, Sec-18,Noida| |M|+91-9899440636| |T | 0120-4218157||E|[email protected] | |W| www.scaa.in|


mailto:[email protected]

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Company Accounts Internal Audit Corporate Social Responsibility Agenda for Today’s Discussion 1...

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