The Books of the Company shall be kept in the accrual basis.
Financial Statement [Section 129 to 131]
The financial statements shall give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards notified under section 133 and shall be in the form or forms as may be provided for different class or classes of companies in Schedule III:
The format for presentation of financial statement is given in Schedule III
Where a company has one or more subsidiaries, it shall, in addition to financial statements, 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 also be laid before the annual general meeting of the company along with the laying of its financial statement of the Company.
Provided that the company shall also attach along with its financial statement, a separate statement containing the salient features of the financial statement of its subsidiary or subsidiaries in such form as may be prescribed:
Provided further that the Central Government may provide for the consolidation of accounts of companies in such manner as may be prescribed.
The provisions of this Act applicable to the preparation, adoption and audit of the financial statements of a holding company shall, mutatis mutandis, apply to the consolidated financial statements.
A company shall not re-open its books of account and shall not recast its financial statements, unless an application in this regard is made by the Central Government, the Income-tax authorities, the Securities and Exchange Board, any other statutory regulatory body or authority or any person concerned and an order is made by a court of competent jurisdiction or the Tribunal to the effect that—
(i) The relevant earlier accounts were prepared in a fraudulent manner; or
(ii) The affairs of the company were mismanaged during the relevant period, casting a doubt on the reliability of financial statements:
The Tribunal, as the case may be, shall give notice to the Central Government, the Income-tax authorities, the Securities and Exchange Board or any other statutory regulatory body or authority concerned and shall take into consideration the representations, if any, made by that Government or the authorities, Securities and Exchange Board or the body or authority concerned before passing any order under his section.
The Financial Statement so revised or re-cast as above shall be final.
If it appears to the directors of a company that—
(a) The financial statement of the company; or
(b) The report of the Board,
Do not comply with the provisions of section 129 or section 134 they may prepare revised financial statement or a revised report in respect of any of the three preceding financial years after obtaining approval of the Tribunal on an application made by the company in such form and manner as may be prescribed and a copy of the order passed by the Tribunal shall be filed with the Registrar:
Provided that the Tribunal shall give notice to the Central Government and the Income tax authorities and shall take into consideration the representations, if any, made by that Government or the authorities before passing any order under this section:
Provided also that the detailed reasons for revision of such financial statement or report shall also be disclosed in the Board's Report.
Constitution of National Financial Reporting Authority (NFRA) [Section 132]
The Central Government may, by notification, constitute a National Financial Reporting Authority to provide for matters relating to accounting and auditing standards under Companies Act 2013. The Head Office of NFRA shall be in New Delhi.
Functions of NFRA
1. Make recommendations on the formulation and laying down of accounting and auditing policies and standards for adoption,
2. Monitor and enforce the compliance with accounting standards and auditing standards
3. Oversee the quality of service of the professions associated with ensuring compliance with such standards, and suggest measures required for improvement
4. Perform such other functions as may be prescribed.
Powers of NFRA
A. The power to investigate, either suo moto or on a reference made to it by the Central Government, for such class of bodies corporate or persons, in such manner as may be prescribed into the matters of professional or other misconduct committed by any member or firm of chartered accountants, registered under the Chartered Accountants Act, 1949:
Provided that no other institute or body shall initiate or continue any proceedings in such matters of misconduct where the National Financial Reporting Authority has initiated an investigation under this section.
B. Has the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit.
C. where professional or other misconduct as per Chartered Accountants Act, of any Chartered Accountant is proved, have the power to make order for—
(a) Imposing penalty of—
(I) not less than one lakh rupees, but which may extend to five times of the fees received, in case of individuals; and
(II) not less than ten lakh rupees, but which may extend to ten times of the fees received, in case of firms;
(b) debarring the member or the firm from engaging himself or itself from practice as member of the Institute of Chartered Accountant of India refund to in clause (e) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 for a minimum period of six months or for such higher period not exceeding ten years as may be decided by the National Financial Reporting Authority.
The Orders passed by NFRA shall be appealed in Appellate Tribunal.
Prescription of Accounting Standards
The Central Government may prescribe the standards of accounting or any addendum thereto, as recommended by the Institute of Chartered Accountants of India in consultation with and after examination of the recommendations made by the National Financial Reporting Authority.
Contents of Board Report to be attached with Audited Balance Sheet
1. Extract of the annual return as may be prescribed by the Central Government.
2. Number of Board Meetings
3. Directors Responsibility Statement
4. Statement of Declaration of Independence by the Independent Director for specified Companies
5. Explanation on Auditors, Company Secretaries and Cost Accountants Observations in their report.
6. Contracts and arrangement with Related Parties
7. State of Companies Affairs
8. The amount, if any, which it proposes to carry to any reserves
9. Material Change
10. Risk Management Policy
Constitution of Corporate Social Responsibility
Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee.
Requirement of Internal Audit
Such classes of companies as may be prescribed, shall be required to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board.
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