The MCA vide Notification No. G.S.R. 206(E), dated March 24, 2021 has issued the ‘Companies (Audit and Auditors) Amendment Rules, 2021’ to further amended the Rule 11 of the Companies (Audit and Auditors) Rules, 2014, that deals with the other matters to be included in auditors report, in a following manner:
- Omitted sub-clause (d) From Rule 11 ibid- Requirement of reporting of requisite disclosures by Company in its financial statements as to holdings as well as dealings in Specified Bank Notes during the period from November 8, 2016 to December 30, 2016.
- Inserted sub-clause (e)(i) From Rule 11 ibid- Reporting of the funds that have been advanced or loaned or invested by the company, other than those disclosed in notes to accounts.
- Inserted sub-clause (e)(ii) From Rule 11 ibid- Receiving of funds for further lending or investing other than those disclosed in notes to accounts.
- Inserted sub-clause (e)(iii) From Rule 11 ibid- Reporting by auditor that nothing has come to their notice that has caused them to believe that the representations contain any material mis-statement.
- Inserted sub-clause (f) From Rule 11 ibid- Dividend declared or paid during the year by the company is in compliance of Section 123 of Companies Act, 2013 (“Companies Act”)
- Inserted sub-clause (g) From Rule 11 ibid- Reporting of Company’s usage of accounting software having feature of recording audit trail and other requirements therein for maintaining books of account
Rule 11 of the Companies (Audit and Auditors) Rules, 2014, now reads as under:
“11. Other matters to be included in auditors report.- The auditor’s report shall also include their views and comments on the following matters, namely:-
(a) whether the company has disclosed the impact, if any, of pending litigations on its financial position in its financial statement;
(b) whether the company has made provision, as required under any law or accounting standards, for material foreseeable losses, if any, on long term contracts including derivative contracts;
(c) whether there has been any delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the company.
(e) (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;
(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
(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.”
The above Notification will come into force with effect from April 1, 2021
The Notifications can be accessed at: http://mca.gov.in/Ministry/pdf/AuditAuditorsAmendmentRules_24032021.pdf