Disclosures – Accounting Standards V/S Companies Act 2013

Bhubaneshwar 26th February,2015

Agenda

• Importance of Disclosures. • Which part of the Companies Act

2013 ( Act 2013) governs the major disclosures.

• In case of conflict what should prevail – Act or the Accounting Standards (AS) – GI -1.

• Form of Auditor’s Report

Importance of Disclosures

• Four cardinal principles of GAAP are :– Recognition – Measurement – Presentation , and – Disclosure – covered in the notes to the accounts.

Disclosure is most neglected of the above. Are the notes part of Financial Statements ? S 2(40)(v) Who is responsible for preparation of notes ? What are auditor’s responsibilities with regards to the notes ?

S 143(2) & (3)(e) Disclosures prescribed by Schedule III additional disclosures. What should ideally be covered in notes to the accounts ? Notes to be cross referenced with the items in the Balance

Sheet and Statement of Profit and Loss .

Caveats

Don’t Copy and Paste • Audit Report of 2013-14• Director’s report Don’t Forget Cash flow statementTo get re-appointed for 5 yearsTo get comprehensive written representationTo get engagement letter

Get ready in April ( once done with bank audits)

Quiz – What is the SA for

• Audit documentation ?• Agreed terms of audit engagement • Written representation • Using the work of another auditor • Using the work of an internal auditor

Important Auditing Standards

• SA 210 Agreeing the terms of audit engagement

• SA 230 Audit documentation• SA 580 Written representation• SA 600 Using the work of another

auditor• SA 610 Using the work of an internal

auditor

Illustrative form of Audit Report

• Nomenclature of Financial Statement :

• “Standalone Financial Statement”, where the Company is required to CFS

• “Financial Statements” – when the company is not required to prepare CFS.

Quiz – Companies Act 2013

• What is the time limit of corrective action to maintain the limit of investments by relative of an auditor ? S 141(3)(d)(i).

a) Sixty days b) Three Months c) Before the Year end d) Two Months

* What is this limit ?

Quiz Companies Act 2013• An auditor appointed under this Act shall provide

to the company only such other services as are approved by the Board of Directors or the audit committee, as the case may be, but which shall not include few services to rendered :-

• a) to the Company • b) directly to the company or its subsidiary

company• c) directly to the company or its subsidiary or

associates • d) directly or indirectly to the company or its

holding company or subsidiary company, namely.

S 144 deals with negative list of services

Quiz – Companies Act 2013 • What is the time limit of complying with the

provisions of section 144.?a) One Month b) Three Months c) Before the closure of the first financial

year after the date of such commencement.

d) Immediately

S 144 deals with negative list of services

Quiz – Companies Act 2013 • A person who is in full time employment elsewhere or a

person or a partner of a firm holding appointment as its auditor, if such persons or partner is at the date of such appointment or re appointment holding appointment as auditor of more than

__________companies; S 141(3)(g)

a) 10 companies b) 20 Companies c) No Limit d) 20 Companies excluding private companies

Private companies are excluded while counting this limit ? Was there a proposal to exclude private companies ? Is there time limit for compliance with this Provision ?

Quiz Companies Act 20131 For the purpose of sub-clause (ii) of clause (d) of sub-section (3) of section 141, a person who or whose relative or partner is indebted to the company or its subsidiary or its holding or associate company or a subsidiary of such holding company, in excess of rupees ___________ lakh shall not be eligible for appointment. ?

a) One Lakhb) Five Lakhs c) Two lakhs

2. Any time limit for correcting ?

Quiz Companies Act 2013

1. For the purpose of sub-clause (iii) of clause (d) of sub-section (3) of section 141, a person who or whose relative or partner has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, or its subsidiary, or its holding or associate company or a subsidiary of such holding company, in excess of ____________ rupees shall not be eligible for appointment

a) One Lakhb) Five Lakhs c) Two lakhs

2. Any time limit for correcting ?

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