The Ministry of Corporate Affairs, Government of India, issued notifications dated 24th March, 2021 to amend Companies (Audit and Auditors) Rule, 2014 to enhance the disclosures required to be made by the Company in its Audit Report.
Purpose of Amendment:
By these amendments MCA increasing stringency in compliances and adding numerous additional disclosures in Financial Statement, Directors Report and Audit Report. The main purpose behind these amendments is more transparency.
Ministry has issues following Notifications:
|S. No.||Date of Notification||Particular||Purpose (Amendment in)|
||24.03.2021||Companies (Audit & Auditors)
Amendment Rules, 2021
Above mentioned amendments shall come into force w.e.f. 01st day of April 2021.
Que: Financial year end on 31st March 2021. Auditor Report signed on 25th August 2021. Whether Company have to give effect of amendment in Auditors Report?
Ans: The above mentioned amendment shall be applicable on Companies for financial year start on or after 01st April 2021. Therefore, this amendment shall effect the Auditor Report as on 31st March 2022 i.e. (f.y. 2021-22).
Therefore, one can opine that Auditors Report for financial year ending 31.03.2021 shall be same as per earlier disclosures.
Amendment in Rule 11 i.e. Other Matters to be Included in Auditors Report. In Rule 11.
- Existing clause (d) shall be omitted.
- New Clause (e), (f) & (g) inserted.
Rule 11(d) whether the company had provided requisite disclosures in its financial statements as to holdings as well as dealings in Specified Bank Notes during the period from 8th November, 2016 to 30th December, 2016 and if so, whether these are in accordance with the books of accounts maintained by the company.]
(i) Whether the management has represented that, to the best of it’s knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other person(s) or entity(ies), including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
Note: Auditor have to check the details in notes to account and take a representation from director about such clause and check all the transaction of Company in respect of loan, advance, investment & their respective documents.
(ii) Whether the management has represented, that, to the best of it’s knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been received by the company from any person(s) or entity(ies), including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
Note: Auditor have to check the details in notes to account and take a representation from director about such clause and check all the transaction of Company in respect of loan and advance received by company & their respective documents.
(iii) Based on such audit procedures that the auditor has considered reasonable and appropriate in the circumstances, nothing has come to their notice that has caused them to believe that the representations under sub-clause (i) and (ii) contain any material mis-statement.
(f) Whether the dividend declared or paid during the year by the company is in compliance with section 123 of the Companies Act, 2013.
(g) Whether the company has used such accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all transactions recorded in the software and the audit trail feature has not been tampered with and the audit trail has been preserved by the company as per the statutory requirements for record retention.
Ques:4 Whether it is mandatory for auditors to add above mentioned three points in auditors report of all the Companies for f.y. 2020-21?
Ques:5 Whether this amendment applicable on Auditors Report of every company or exemptions are given to some classes of companies?
Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at [email protected]).
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