Company Law: Accounts and Audit

Company Law:
Accounts and Audit

mandatory to maintain books of
Compulsory Audit
accounts
 If the income of business or  Business : total sales,
profession exceeds Rs 2.5 turnover or gross receipts are
lakhs or the total sales or more than Rs. Rs. 2 crores)
turnover
or  Profession: If gross receipts
 gross receipts exceed Rs 25 are more than Rs. 50 lakhs)
lakhs in any of the three
preceding previous years.
Accounts of Companies(128)
Books of Account(section 128 of Co, Act 2013)

 Every company shall prepare and keep at its registered office book of
accounts and other relevant books and papers and financial statement
for every financial year.( uniform- April to March)
 Books of accounts shall give;

i. a true and fair view of the state of the affairs of the company ,
including that of its branch office or offices.
ii. Explain the transaction effected both at the registered office and its
branches.
 Books of accounts shall be kept on accrual basis and according to the

double entry system of accounting.
Place of keeping of Books of Account
 Books of account and other relevant papers may be kept at such other
place in India as Board of Directors may decide informing (within 7
days of such decision) the Registrar of Companies,(ROC) giving full
details of that other place.
 Company shall keep books and papers for eight years. And directors
may inspect the same.

Manner of Books of Account to be kept in
electronic form
 The books of account and other relevant books and papers maintained
in electronic mode shall remain accessible in India for so as to be
usable for subsequent reference.
 The books and account and other relevant books and papers shall be
retained completely in the format in which they were originally
generated, sent or received.
 Information received from branch offices shall not be altered and shall
be kept in a manner, that was originally received from the branches.
 Information in the electronic record shall be capable of being displayed
in a legible form.
 There shall be proper system for storage, retrieval, display of the
electronic records and back up of books of account maintained in
electronic mode shall be kept in servers physically located in India.
Financial Statement
(section 129 of Co, Act 2013)
 The financial statement shall give true and fair view of the state of
affairs of the company, comply with accounting standards and shall be
in Schedule III, other than Insurance company, Banking company or
Company engaged in the generation or supply of electricity.
 A Company having one or more subsidiaries shall in addition to
financial statement, prepare a consolidated financial statement of
the company and of all the subsidiaries in the same form and manner
as that of its own which shall be laid before the AGM of the
Company.
Authentication of Financial Statement
(Section 134 of Co, Act 2013)
 The financial statement including consolidated financial statement,
shall be approved by Board of Directors before they are signed on
behalf of the Board at least by ;
i. the Chair person of the company where he is authorised by the

Board.
ii. two directors out of which one shall be managing director and the
Chief Executive Officer, if he is a director in the company.
iii. Chief Financial Officer and the Company Secretary of the company,
wherever they are appointed.
Circulation of copies of Audited Financial
Statement(section 136 of Co, Act 2013)
 A copy of the financial statement, including consolidated financial
statement, if any, auditors report and every other document required
by law to be annexed to the financial statement, which are to be laid
before a company in its AGM shall be sent to;
i. every member of the company.
ii. to every trustee for the debenture-holder of any debenture issued by
the company.
iii. to all other persons except such members/trustees.
 For listed company, the provision shall be deemed to be complied

with if copies of all the documents are made available for inspection
at its registered office during working hours for a period of 21 days
before the date of the AGM.
 Listed company shall also place its financial statement including
consolidated financial statement and other documents on its
website.
Filling of Financial Statement with Registrar
section 137 of the Co, Act 2013
 A copy of financial statement (FS) including consolidated financial
statement, duly adopted shall be filed with the Registrar within 30 days
of the date of AGM. In case the company is having a foreign subsidiary
not having a place of business in India,the accounts of such subsidiary
shall be attached to FS.
 Where financial statement are not adopted at AGM or adjourned AGM,

such unadopted financial statement shall be filed with the Registrar
within thirty days of the date of AGM and Registrar shall take them in
his records as provisional till adopted financial statement are filed with
him.
 Where AGM of a company for any year has not been held, the financial
statement duly signed along with the statement of facts and reasons for
not holding AGM shall be filed with the Registrar within 30 days of the
last date before which AGM should have been held.
Directors, Responsibility statement(134)
 Applicable accounting standards(AS) have been
followed, with explanation of deviations;
 Directors have made prudent and reasonable
judgements in application of AS;
 Adequate accounting records have been maintained;
 Prepared in going concern basis
Audit of company accounts
Appointment of Auditor(section 139 of the Co,
Act 2013)
 Every company shall at the first AGM appoint an individual or a firm as
an auditor who shall hold office from the conclusion of that meeting
till the conclusion of every sixth meeting.
 Listed companies and unlisted public companies with rs. 10 cr paid
up capital, private companies having Rs.25 cr paid up capital or both
these types of companies having public borrowing and deposit of Rs.
50 cr, shall appoint or re-appoint:
 an individual, as auditor for max. one term of 5 consecutive years
and
b)an audit firm, as auditor for Max two terms of 5 consecutive years.
Appointment of First Auditor
Other than Government Company
 By Board of Directors-
 within 30 days of registration of the company.
In case of failure by the Board-
 members of the company shall fill the vacancy within 90 days at EGM
The auditor so appointed shall hold office till the conclusion of the first AGM.
Appointment of Auditor in Casual Vacancy
Other than government Company
 By Board of Directors -
Casual vacancy would arise
due to death/ resignation of
 within 30 days . the auditor
 Where the vacancy is as a result of resignation of an auditor-
 Such appointment shall be approved by the Company at a AGM convened

within 3 months of the recommendation of the Board and auditor shall hold
office till the conclusion of next AGM.
Disqualification of Auditor(section 141 of Co,
Act 2013)
 A person shall be eligible for appointment as an auditor of a company
only if he is a Chartered accountant.
The following persons shall not be eligible for appointment as an auditor
of a company:-
a) a body corporate other than LLP registered under LLP Act, 2008,
officer or employee of the company, person who is a partner or who is
in the employment of an officer or employee of the company
b) person who, or his relative or partner-
i. is holding any security in the company
ii. Is indebted to the company
iii. Has given guarantee in connection with indebtedness
Not to render certain services
 Accounting and boo keeping

 Internal audit
 Design of financial system
 Actuarial services
 Investment advisory services
 Outsourced financial services
 Management services
Role of Auditor
 The Auditor shall examine the books of account independently

form his opinion and report:
 Whether proper books of accounts have been kept by the company.
 Whether proper returns have been received from the branches.
 Whether balance sheet and profit and loss account are in agreement
with books of account and returns.
 Whether any director is disqualified from appointed.
 Whether the company has adequate internal financial control system.

Removal of auditor
 Special notice from the shareholder
 and special resolution of shareholders nad approval of
CG;
 Opportunity of hearing;
 In case of resignation, auditor to intimate ROC.

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Company Law:

Accounts and Audit

Books of Account(section 128 of Co, Act 2013)

 Books of accounts shall give;

 Books of accounts shall be kept on accrual basis and according to the

place in India as Board of Directors may decide informing (within 7

days of such decision) the Registrar of Companies,(ROC) giving full

details of that other place.

may inspect the same.

i. the Chair person of the company where he is authorised by the

 For listed company, the provision shall be deemed to be complied

 Where financial statement are not adopted at AGM or adjourned AGM,

 within 30 days of registration of the company.

In case of failure by the Board-

Other than government Company

 Where the vacancy is as a result of resignation of an auditor-

 Such appointment shall be approved by the Company at a AGM convened

 Accounting and boo keeping

 The Auditor shall examine the books of account independently

 Whether proper returns have been received from the branches.

 Whether any director is disqualified from appointed.

 Whether the company has adequate internal financial control system.

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