Background: The Central Government has amended Schedule III of the Companies Act, 2013 which prescribes the format of financial statements to be prepared by companies. The Central Government has further amended the Companies (Accounts) Rules, 2014 and the Companies (Audit and Auditors) Rules, 2014 through the Companies (Accounts) Amendment Rules, 2021 and the Companies (Audit and Auditors) Amendment Rules, 2021 respectively. All the aforesaid amendments are effective from April 1, 2022.
1. What are the amendments brought in Schedule III?
Companies have to give more disclosures in their financial statements which include shareholdings of promoters separately for each class, current maturities of long term borrowings, ageing of trade payables and receivable, disclosure of use of borrowings from banks and financial institutions in accordance with the borrowing agreements, declaration about wilful defaulters, details of immovable properties not in the name of company, details of loans or advances granted to promoters, directors, KMPs and the related parties, details about capital work in progress, details of proceedings under Benami Transactions (Prohibition) Act, 1998, details of transactions with struck off companies and relationship with such companies, compliance with number of layers, compliance with approved scheme of compromise or arrangements, details about the CSR expenditure, details of crypto currency, various ratios, undisclosed income etc.
2. What are the amendments brought in Companies (Accounts) Rules, 2014?
The Central Government has also mandated to use such accounting software which has feature of recording audit trail for each and every transaction, creating an edit log of each change made in books of account along with the date when such changes made and ensuring that audit trail can-not be disabled. Further, in the board report, the company has to disclose the details of application made or proceedings pending against the company under the Insolvency and Bankruptcy Code, 2016 during the year along with status at the end of the year and the details of difference between amount of the valuation done at the time of one-time settlement and valuation done at the time of taking loan from banks and financial institution along with the reason thereof.
3. What are the amendment brought in Companies (Audit and Auditors) Rules, 2014?
The Auditors have to include certain additional disclosures in their Report. The Auditors have to disclose about money being advanced, loaned or invested in the others with the understanding that the other entity will further advance, loan or invest on behalf of the company. The auditors have also to disclose whether the dividend is declared and paid by company in compliance with the provisions of section 123 of the Companies Act, 2013. Auditors have also to report whether the company has used such accounting software or not which has feature of recording audit trail for each and every transaction, creating an edit log of each change made in books of account along with the date when such changes made and ensuring that audit trail can-not be disabled.
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