MCA notifies Companies (Auditor’s Report) Order 2020 – CARO 2020.

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The government had issued new norms for auditors, seeking more disclosures in reports, a move which comes after a series of corporate scams and frauds surfaced over the past few years.

CARO 2020 – Companies (Auditor’s Report) Order, 2020

MCA in place of existing the Companies (Auditor’s Report) Order, 2016, has notified CARO 2020 after consultation with the National Financial Reporting Authority constituted under section 132 of the Companies Act, 2013.

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 on the accounts of every company audited by him, to which this Order applies, for the financial years commencing on or after the 1st April, 2019, shall in addition, contain the matters specified in paragraphs 3 and 4, of the CARO 2020.

Provided this Order shall not apply to the auditor’s report on consolidated financial statements except clause (xxi) of paragraph 3.

It shall come into force on the date of its publication in the Official Gazette.

CARO 2020 – Key changes/highlights

Matters to be included in auditor’s report, in CARO 2020 – the reporting clauses are more extensive and detailed than were in CARO2016

Unlike CARO 2016, which required reporting on all fixed assets, new reporting requirements pays attention to Property, Plant, Equipment and intangible assets.

Reporting on revaluation of Property, Plant and Equipments by company

Reporting of proceedings under the Benami Transactions (Prohibition) Act, 1988.

Reporting of compliances if company was sanctioned working capital limits in excess of Rs.5 crores or more from banks or financial institutions.

 – whether the quarterly returns or statements filed by the company with such banks or financial institutions are in agreement with the books of account of the Company, if not, to give details;

Reporting of investments in or in providing of any guarantee or security or granting any loans or advances to companies, firms, Limited Liability Partnerships or any other parties.

Reporting of compliances with RBI directives and the provisions the Companies Act with respect to deemed deposits.

Reporting with respect to transactions not recorded in the books of account surrendered or disclosed as income in the income tax proceedings.

Comprehensive reporting requirement for default in the repayment of loans / other borrowings or in the payment of interest

 – whether the company is a declared wilful defaulter by any bank or  financial institution or other lender; 

 – whether term loans were applied for the purpose for which the loans were obtained; if not, the amount of loan so diverted and the purpose for which it is used may be reported; 

 – whether funds raised on short term basis have been utilised for long term purposes,  if yes, the nature and amount to be indicated

Reporting on treatment by auditor of whistle-blower complaints received during the year by the company 

Reporting on internal audit system

 – whether the company has an internal audit system commensurate with the size and nature of its business; 

 – whether the reports of the Internal Auditors for the period under audit were considered by the statutory auditor;   

Reporting on cash losses

Reporting on resignation of the statutory auditors

Reporting on uncertainty of company capable of meeting its liabilities

Reporting transfer of unspent CSR amount to Fund specified in Schedule VII

Reporting on qualifications or adverse remarks by the auditors in the CARO reports of companies included in the consolidated financial statements

It is expected that CARO, 2020 will improve the overall quality of reporting by the auditors and thereby lead to “greater transparency and faith in the financial affairs of the companies.”

Read : CARO 2020 dated 25.02.2020

Large unlisted companies face quicker disclosure rule

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Large unlisted companies may have to make quarterly or half-yearly filings, like their listed counterparts, as the government is considering amendments to the Companies Act to mandate more frequent disclosures in the aftermath of the IL&FS collapse.

The ministry of corporate affairs (MCA) is expected to prescribe a threshold for the disclosure requirement as it does not want to burden all companies, as a bulk of them are small companies, sources told TOI. The idea is to track the systemically important companies, which pose a risk to the entire system. “It will be an enabling amendment and MCA will decide on timing and extent of disclosures later,” said a source.

The assessment in the government is that there is a massive lag, often up to 18 months related to annual filings by companies, many of which have been non-compliant in the past. An entity like the beleaguered IL&FS was not on the radar till it collapsed and MCA is hoping that periodic disclosures would reduce the chances of such failures going undetected. Currently, companies are required to annually file the consolidated financial statement, balance sheet, profit & loss account, annual returns, directors’ report and certified true copy of board resolution with the designated RoC.

The proposal to increase disclosures is expected to be part of a set of amendments to be taken up by a group of ministers chaired by home minister Amit Shah, with defence minister Rajnath Singh, finance & corporate affairs minister Nirmala Sitharaman, commerce & industry minister Piyush Goyal and law & justice minister Ravi Shankar Prasad among the nine members of the committee, sources told TOI.

The ministerial panel, referred to as alternate mechanism by the Narendra Modi administration, will largely look at the recommendations of the company law panel, which submitted its report. While MCA was pushing for the introduction of the Bill during the recently concluded Winter Session, the legislation will now be placed before the Parliament as soon as it is cleared by ministers. The ministry is hoping to introduce the Bill during the budget session.

Source: Times of India

ICAI UDIN aims to address concerns of CAs with respect to forgery and fake use of name by Non CAs.

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ICAI have launched Unique Document Identification Number (UDIN) facility which is a unique number, which will be generated by the system for every document certified/ attested by a Chartered Accountant and registered with the UDIN portal available at https://udin.icai.org/ with effect from 1st July 2018.

It has been noticed that financial statements and documents were being certified/attested by third persons, in lieu of Chartered Accountants. As these statements are being relied upon by the authorities as true statements and certificates, UDIN can be generated by a practicing CA by registering his/her documents/ certificates on UDIN Portal for verification.

A practicing Chartered Accountant can generate a UDIN for certificate/ document attested by him either in individual capacity or as a partner.

At present, this facility is recommendatory. But ICAI is mulling to make the same compulsory in near future, so as to curb the menace of fake or forged documents.

No change is possible in the data already registered by a Chartered Accountant in the online system. Therefore, members are requested to thoroughly check the details in preview option before submission of their application.

Information filled in can be edited/ modified any number of times before the submission. But once it is submitted, it cannot be edited.

The UDIN once generated can be withdrawn or cancelled with narration. Hence if any user search for this UDIN, appropriate narration indicated by Member with the date of revoke will be displayed for reference.

 

 

Link: UDIN for Practicing CAs

Companies Act Compliance: Consequences of not filing Annual Return

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Last week, the Parliament cleared a bill to further amend the Companies Act.

The financial statements and annual returns of all company must be filed on time with the ROC / MCA each year. As per Companies Act, 2013, non-filing of annual return is an offence, consequences of which affect the directors, as well as the company.

Hence, it is a must for every company to file with the MCA:

1. The annual return within 60 days of the Annual General Meeting and

2. The Financial Statement, within 30 days of the Annual General Meeting.

The various consequences and the penalties for not filing annual return of a company (Forms MGT-7 & AOC-4) are highlighted here.

A. Consequences – for Directors

The Directors of a company are responsible for ensuring the compliance of the company with all applicable rules and regulations. When a company defaults on compliance or dues payable, the Directors are held responsible for the default. The following are penal consequences for a Director of a company for default of non-filing of the Annual Return.

Director Disqualification

In case a company has not been filed its Annual Return for three continuous financial years, then every person who has been a director or is currently the director of the specific company could be disqualified under the Companies Act, 2013. If a Director is disqualified, his/her DIN would become inactive and the person would not be eligible to be appointed as a Director of any company for a period of five years from the date of disqualification. Further, disqualified Directors would not also be allowed to incorporate another company for a period of five years.

Fine & Imprisonment

A director of the company can be punished if the company has not been filed even after 270 days from the date when the company should have originally filed with additional penalty. Any Director who has defaulted in the filing of annual return of a company can also be penalized with an imprisonment of a term extended up to six months or with a fine of an amount not lesser than fifty thousand rupees and it might extend up to five lakh rupees, or with both imprisonment and fine. However, this provision provided under the Companies Act, 2013 is rarely used.

In addition, if any information filed by a Director or any other person in the annual return is false by any nature or if he/she failed to mention any fact or material that is true can be punished with imprisonment for a term  which is not lesser than six months and which could extend up to 10 years. Further, he/she can also be liable for payment of a fine which is not lesser than the amount subject to the fraud involved and it may extend to an amount three times of the sum concerned with the fraud.

B. Consequences of Default – For Company

The following are some of the penal consequences for a company that has not filed its annual return:

Penalty

Normally, the Government fee for filing or registering any document under the Companies Act required or authorized to be filed with the Registrar is Rs.200. A private limited company would be required to file form MGT-7 and form AOC-4 each year and the government fee applicable if filed on time would be Rs.400. In case of delay in filing of annual return, the penalty as mentioned would be applicable:

The penalty for not filing a company’s annual return (Form MGT-7 and Form AOC-4) is increased to Rs.100 per day w.e.f.July 1, 2018.

Strike-Off

In case the company has not filed its Annual Return for the last two financial years continuously, then such companies would be termed as an “inactive company”. On such a classification, the bank account of the company could be frozen. Further, the Registrar could also issue a notice to the Company and initiate strike-off of the company from the MCA records.

 

In case you need any assistance to file annual return for your company, you can contact us at Director@Sunkrish.com

MCA extends the due date for filing all AOC-4 (Annual Financial Statemet) till 28.11.2017.

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MCA has relaxed additional fees and extended the last date of filing of AOC-4 XBRL & non-XBRL e-filing for the companies.

 

Ministry of Corporate Affairs has extended the due date for filing the Audited Financial Statement for Financial Year 2016-17 till November 28,2017.

 

 

Keeping in view the requests received from various stakeholders, for allowing extension of time for filing of financial statements for the financial year ended 3I.03.2017 on account of various factors, it has been decided to extend the time for liling e-forms AOC-4 and AOC-4 (XBRL non-Ind AS) and the corresponding AOC-4 CFC e-forms up to 28.11.20l7 without levying additional fee.

 

The official circular in this regard is appended below.

=================================================================

F No. 01/34/2013-CL-V
Government of India
Ministry of Corporate Affairs

5th Floor, A Wing, Shastri Bhawan,
Dr. R.P. Road, New Delhi – 110001
Dated:- 27th October, 2017

To

All Regional Directors,
All Registrar of Companies,
All stakeholders

Subject: Relaxation of additional fees and extension of last date of filing of AOC-4 and AOC-4 (XBRL Non-IndAS) under the Companies Act, 2013 – reg.

  1. The Ministry of Corporate Affairs has extended the date of filing of AOC-4 (XBRL E-Forms using Ind AS) for the financial Year 2016-17 without additional fees till 31.03.2018 vide General Circular No. 13/2017 dt 26.10.2017. Keeping in view the requests received from various stakeholders, for allowing extension of time for filing of financial statements for the financial year ending on 31.03.2017 on account of various factors, it has been decided to extend the time of filing e-forms AOC-4 and AOC-4 (XBRL Non-IndAS) and the corresponding AOC-4 CFC e-forms upto 28.11.2017 without levying additional fees.
  2. This issues with the approval of competent authority.

Yours faithfully,

KMS Narayanan

Assistant Director

011-23387263

 

Ministry of Corporate Affairs – General Circular14_28102017

Now, listed companies’ management to explain audit qualifications : SEBI

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Markets regulator Sebi today asked listed companies to disseminate cumulative impact of audit qualifications in a separate format along with the annual audited financial results to the stock exchanges.

Besides, the management of a company would be required to explain its view about audit qualifications.

The new framework would ensure that the impact of audit qualifications are clearly communicated by the companies concerned to their investors in a timely manner apart from streamlining the whole process.

Sebi decided to have the new system on audit qualifications after extensive discussions with its advisory committees, Institute of Chartered Accountants of India (ICAI), stock exchanges and industry bodies.

Now, listed entities will be required to disclose the cumulative impact of all audit qualifications on relevant financial items in a separate form called ‘Statement on Impact of Audit Qualifications’ instead of the present form.

Such disclosures will have to be made in a tabular form, along with annual audited financial results filed in compliance with the listing regulations.

The new mechanism will be applicable for all the annual audited standalone/consolidated financial results, submitted by the listed entities for the period ended March 31, 2016 and thereafter.

The listed entity will have to furnish a declaration in case there are no audit qualifications.

In case of audit reports with modified opinion, a statement showing impact of audit qualifications will be filed with the stock exchanges in a format specified by the regulator, Sebi said in a circular today.

Issuing a format for ‘Statement on Impact of Audit Qualifications’ for the financial year, Sebi said that companies will have to disclose net profit, networth, turnover, total expenditure, earning per share, total assets and liabilities.

Besides, the firms will have to make submission about details, types, frequency of audit qualification. The management will have the right to give its views on the audit qualification.

Also, the management of the listed entity will have explain its views on the audit qualifications.

“Where the impact of the audit qualification is not quantified by the auditor, the management shall make an estimate. In case the management is unable to make an estimate, it shall provide reasons for the same. In both the scenarios, the auditor shall review and give the comments,” Sebi noted.

Source: http://www.business-standard.com/article/pti-stories/now-listed-cos-management-to-explain-audit-qualifications-116052700918_1.html