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GOVERNMENT OF INDIA
Ministry of Corporate Affairs
NOTICE INVITING COMMENTS ON THE DRAFT
COMPANIES (AUDITOR’S REPORT) ORDER, 2016
Dated the 9th February, 2016
The Ministry had set-up a Committee on 16th
September, 2015 to examine and recommend matter for inclusion in the statement
to be attached with Auditor’s Report under Section 143(11) of the Companies
Act, 2013 for the financial year 2015-16 onwards. The said Committee has since
made recommendations in the matter.
2. The draft Companies (Auditor’s
Report) Order, 2016 has been placed on the Ministry’s website at
www.mca.gov.in. It has been decided to invite suggestions/comments on the above
draft.
3.
Suggestions/comments on above mentioned draft along with justification in brief
may be sent latest by 23rd February, 2016 through email at caro@mca.gov.in. It
is requested that the name, Telephone number and address of the sender should
be indicated clearly at the time of sending suggestions/comments.
Name,
Address, Contact No. of Stake holder __________________
SL.No
|
Para No.
|
Suggestion
|
Justification
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DRAFT COMPANIES (AUDITOR’S REPORT) ORDER, 2016
1. Short title, application and commencement.-
(1)
This Order may be called the Companies (Auditor’s Report) Order, 2016.
(2)
It shall apply to every company including a foreign company as defined
in clause (42) of section 2 of the Companies Act, 2013 (18 of 2013)
[hereinafter referred to as the Companies Act], except:–
(i)
a banking company as defined in clause (c) of section 5 of the
Banking Regulation Act, 1949 (10 of 1949);
(ii)
an insurance company as defined under the Insurance Act,1938 (4 of
1938);
(iii)
a company licensed to operate under section 8 of the Companies Act; (iv)
a One Person Company as defined under clause (62) of section 2 of the Companies
Act and a Small Company as defined under clause (85) of section 2 of the
Companies Act; and
(v)
a private limited company, not being a subsidiary or holding of a public
company, having a paid up capital and reserves and surplus not more than rupees
one crore as at the balance sheet date and which does not have total borrowings
exceeding rupees one crore from any bank or financial institution at any point
of time during the financial year and which does not have a total revenue as
defined in Scheduled III to the Companies Act, 2013 (including revenue from
discontinuing operations) exceeding rupees ten crore during the financial year
as per the financial statements.
(3)
It shall come into force on the date of its publication in the Official
Gazette.
2. Auditor’s report to contain matters
specified in paragraphs 3 and 4. –
Every
report made by the auditor under section 143 of the Companies Act, 2013 on the
accounts of every company examined by him to which this Order applies for the
financial year commencing on or after 1st April, 2015, shall contain the
matters specified in paragraphs 3 and 4.
Provided
the Order shall not apply to the auditor’s report on consolidated financial
statements.
3. Matters to be included in the auditor’s
report. –
The
auditor’s report on the accounts of a company to which this Order applies shall
include a statement on the following matters, namely:
(i)
(a) Whether the company is maintaining proper records
showing full particulars, including quantitative details and situation of fixed
assets;
(b)
Whether these fixed assets have been physically verified by the management at
reasonable intervals; whether any material discrepancies were noticed on such
verification and if so, whether the same have been properly dealt with in the
books of account;
(c)
Whether title deeds of immovable properties are held in the name of the
company. If not, provide details thereof.
(ii)
Whether physical verification of inventory has been
conducted at reasonable intervals by the management and whether any material
discrepancies were noticed and if so, how they have been dealt with in the
books of account;
(iii)
Whether the company has granted any loans, secured or
unsecured to companies, firms or other parties covered by clause (76) of
Section 2 of the Companies Act, 2013. If so,
(a)
Whether the terms and conditions of the grant of such loans are not prejudicial
to the company’s interest;
(b)
Whether receipt of the principal amount and interest are regular. If not
provide details thereof; and
(c)
If overdue amount is more than rupees five lakhs, whether reasonable steps have
been taken by the company for recovery of the principal and interest;
(iv)
In respect of loans, investments and guarantees, whether
provisions of Section 185 and 186 of the Companies Act, 2013 have been complied
with. If not, provide details thereof.
(v)
in case the company has accepted deposits, whether the
directives issued by the Reserve Bank of India and the provisions of sections
73 to 76 or any other relevant provisions of the Companies Act, 2013 and the
rules framed thereunder, where applicable, have been complied with? If not, the
nature of such contraventions be stated; If an order has been passed by Company
Law Board or National Company Law Tribunal or Reserve Bank of India or any
court or any other tribunal, whether the same has been complied with or not?
(vi)
whether maintenance of cost records has been specified by
the Central Government under sub-section (1) of section 148 of the Companies
Act, 2013 and whether such accounts and records have been so made and
maintained;
(vii)
(a) whether the company is regular in depositing undisputed
statutory dues including provident fund, employees’ state insurance,
income-tax, sales-Lax, , service tax, duty of customs, duty of excise, value
added tax, and any other statutory dues with the appropriate authorities and if
not, the extent of the arrears of outstanding statutory dues as at the last day
of the financial year concerned for a period of more than six months from the
date they became payable, shall be indicated by the auditor.
(b)
Where dues of income tax or sales tax or service tax or duty of customs or duty
of excise or value added tax have not been deposited on account of any dispute,
then the amounts involved and the forum where dispute is pending shall be
mentioned. (A mere representation to the concerned Department shall not be
treated as a dispute).
(viii)
Whether the company has defaulted in repayment of dues to a financial
institution or bank or debenture holders? If yes, the period and amount of
default to be reported (in case of banks and financial institutions, lender
wise details to be provided).
(ix)
Whether moneys raised by way of public issue/ follow-on
offer (including debt instruments) and term loans were applied for the purposes
for which those are raised. If not, the details together with delays / default
and subsequent rectification, if any, as may be applicable, be reported;
(x)
Whether any fraud by the company or any fraud on the Company
by its officers/ employees has been noticed or reported during the year; If
yes, the nature and the amount involved be indicated.
(xi)
Whether managerial remuneration has been paid / provided in
accordance with the requisite approvals mandated by the provisions of section
197 read with schedule V to the Companies Act? If not, state the amount
involved and steps taken by the company for securing refund of the same.
(xii)
Whether the Nidhi Company has complied with the Net Owned Fund in
the ratio of 1: 20 to meet out the liability and whether the Nidhi Company is
maintaining 10% liquid assets to meet out the unencumbered liability.
(xiii)
Whether all transactions with the related parties are in compliance with
Section 188 and 177 of Companies Act, 2013 where applicable and the details
have been disclosed in the Financial Statements etc as required by the
accounting standards and Companies Act, 2013.
(xiv)
Whether the company has made any preferential allotment / private
placement of shares or fully or partly convertible debentures during the year
under review and if so, as to whether the requirement of Section 42 of the
Companies Act, 2013 have been complied and the amount raised have been used for
the purposes for which the funds were raised. If not, provide details thereof.
(xv)
Whether the company has entered into any non-cash transactions
with directors or persons connected with him and if so, whether provisions of
Section 192 of Companies Act, 2013 have been complied with.
4. Reasons to be stated for unfavourable or
qualified answers.-
(1)
Where, in the auditor’s report, the answer to any of the
questions referred to in paragraph 3 is unfavourable or qualified, the
auditor’s report shall also state the basis for such unfavourable or qualified
answer, as the case may be.
(2)
Where the auditor is unable to express any opinion on any
specified matter, his report shall indicate such fact together with the reasons
as to why it is not possible for him to give his opinion on the same.
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