Major changes in Financial statements disclosures and audit reporting for FY 2021-22 and onwards

Matter

Description

Audit Reporting

1.

Presentation of financial figures in the financial statements

The figures appearing in the financial statements shall now be compulsorily rounded off to the nearest hundreds, thousands, lakhs, millions or crores, depending on the Total Income of the company.

2.

Shareholding of Promoters.

The company shall disclose a detailed name-wise shareholding of promoters at the end of the year along with changes during the year.

3.

Classification and Ageing of Trade Payables and Trade Receivables.

The company shall classify trade payables and receivables as “disputed” and “undisputed”, further unbilled dues to be shown separately. The ageing schedule of trade payables shall be: < 1 year, 1-2 years, 2-3 years, > 3 years. The ageing schedule of trade receivables shall be: < 6 months, 6 months - 1 year, 1-2 years, 2-3 years, > 3 years.

4.

Diversion of funds borrowed from banks and financial institutions

Where the company has not used the borrowings from banks and financial institutions for the specific purpose for which they were availed, the company shall disclose the details of where they have been used.

The auditor has to report in CARO whether term loans were applied for the purpose for which the loans were obtained, and if not, the amount of loan so diverted and the purpose for which it is used.

5.

Realisable value of assets

The company shall disclose whether the Board of Directors is of the opinion that any of the assets other than Property, Plant and Equipment, Intangible Assets and non-current investments have realisable value less than their carrying amount in the ordinary course of business.

6.

Immovable properties not held in the name of company

The company shall provide the details of all the immovable properties where title deeds are not held in the name of the company or where lease agreements are not executed in favour of the company, along with reasons, details of any dispute and the name of actual title holder. Where such immovable properties are jointly held, details are to be given to the extent of company’s share.

The auditor has to report similar details in CARO.

7.

Fair value of Investment Property (only for Ind AS)

The company shall disclose as to whether the fair value of investment property is based on a registered valuer’s report.

8.

Revaluation of Property, Plant and Equipment and intangible assets

Where the company has revalued its Property, Plant and Equipment or intangible assets, the company shall disclose as to whether the revaluation of PPE or intangible assets is based on a registered valuer’s report.

The auditor has to report similar details in CARO and also specify the amount of change, if change is 10% or more in the aggregate of net carrying value of each class of PPE or intangible assets.

9.

Loans or Advances granted to Promoters, Directors, KMPs and Related Parties

The company shall disclose the loans or advances in the nature of loans granted to promoters, directors, KMPs and related parties, that are either repayable on demand or granted without specifying any terms or period of repayment along with their percentage to the total loans and advances in the nature of loans.

The auditor has to report in CARO whether the company has granted loans or advances in the nature of loans either repayable on demand or without specifying any terms or period of repayment to any person, and if so, to specify the aggregate amount of such loans and percentage to the total loans granted and the aggregate amount of such loans granted to promoters, related parties.

10.

Classification, Ageing Schedule and Completion Schedule of Capital work-in-progress and Intangible Assets under development

The company shall classify capital work-in-progress and intangible assets under development as “projects in progress” and “projects temporarily suspended”. The ageing schedule of capital work-in-progress and intangible assets under development shall be: < 1 year, 1-2 years, 2-3 years, > 3 years. For capital work-in-progress and intangible assets under development whose completion is overdue or has exceeded its cost compared to its original plan, completion schedule shall be given as: < 1 year, 1-2 years, 2-3 years, > 3 years, further, details of projects where activity is suspended to be shown separately.

11.

Benami Property

Where any proceedings have been initiated or pending against the company for holding any benami property, the company shall disclose the details of such property, beneficiaries, nature and status of proceedings and company’s view on the same.

The auditor has to report in CARO as to whether the company has appropriately disclosed the details in its financial statements.

12.

Returns or statements filed with banks or financial institutions in agreement with books of accounts

Where the company has borrowings from banks or financial institutions on the basis of security of current assets, the company shall disclose as to whether quarterly returns or statements of current assets filed by the company with banks or financial institutions are in agreement with the books of accounts and if not, summary of reconciliation and reasons of material discrepancies to be disclosed.

The auditor has to report similar details in CARO.

13.

Wilful defaulter

Where company is a declared wilful defaulter by any bank or financial institution or other lender, the company shall disclose the date of declaration as wilful defaulter and the details of defaults.

The auditor has to report similar details in CARO.

14.

Relationship with struck off companies

Where the company has any transactions with struck off companies, the company shall disclose the nature of these transactions and the balance outstanding.

15.

Pending filing of charges

Where any charges or satisfaction yet to be registered with Registrar of Companies beyond the statutory period, the company shall disclose the details along with reasons.

16.

Compliance with number of layers of investments

Where the company has not complied with Companies (Restriction of Number of Layers) Rules, 2017, the company shall disclose the details of downstream companies beyond the specified layers.

17.

Ratio Analysis

The following ratios to be disclosed:

(1) Current Ratio

(2) Debt-Equity Ratio

(3) Debt Service Coverage Ratio

(4) Return on Equity Ratio

(5) Inventory Turnover Ratio

(6) Trade Receivables Turnover Ratio

(7) Trade Payables Turnover Ratio

(8) Net Capital Turnover Ratio

(9) Net Profit Ratio

(10) Return on Capital Employed

(11) Return on Investment

The company shall explain the numerator and denominator for computing the above ratios. Further the company shall provide explanation for any change in ratio by more than 25% as compared to the preceding year.

18.

Compliance with approved Scheme of Arrangements

Where any scheme of arrangements has been approved in terms of sections 230 to 237 of the Companies Act, 2013 the company shall disclose as to whether the effect of such scheme of arrangements have been accounted for in the books of account of the company in accordance with the Scheme and in accordance with the accounting standards and explain any deviation in this regard.

19.

Money laundering

Where the company has advanced or loaned or invested funds to intermediaries for directly or indirectly lending to, or investing in, or providing guarantee or security on behalf of ultimate beneficiaries identified by the company and/or where the company has received any fund to act as intermediary for directly lending to, or investing in, or providing any guarantee or security on behalf of ultimate beneficiaries identified by the funding parties, the company shall disclose the details of such transactions along with the declaration that such transactions are in compliance with FEMA and Companies Act, 2013 and are not violative of PMLA.

The auditor has to report that whether the management has represented that other than the transactions disclosed in the notes to the accounts, no funds have been advanced or loaned or invested by company to any intermediary and no funds have been received by the company to act as intermediary. Further, the auditor has to report that based on reasonable and appropriate audit procedures, whether there are reasons to believe that representations made by the management contain any material misstatement.

20.

Undisclosed income

The company give details of any transaction not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (e.g. search, survey, etc.) except where there is immunity for disclosure under any scheme. The company shall also state whether the previously unrecorded income and related assets have been properly recorded in the books of accounts during the year.

The auditor has to report in CARO whether the previously unrecorded income has been properly recorded in the books of accounts during the year.

21.

CSR

Where the company is covered under section 135 of the Companies Act, 2013, the company shall disclose the amount required to be spent by the company during the year, amount actually spent, shortfall at the end of the year, previous years’ shortfall, reason for shortfall, nature of CSR activities, details of related party transactions w.r.t. CSR expenditure, etc.

22.

Crypto currency

Where the company has traded or invested in Crypto currency or Virtual currency during the financial year, the company shall disclose the profit or loss on such transactions, amount of such currency held on reporting date, deposits or advances accepted from any persons for the purpose of trading or investing in such currency.

Matter

Description

1.

Dividend

Whether dividend declared or paid during the year by the company is in compliance with section 123 of the Companies Act, 2013.

2.

Accounting software with audit trail

Whether the company has used accounting software with audit trail (edit log) in respect of financial year commencing on or after 1^st April, 2022.

3.

Discrepancies noticed in physical verification of Inventory

Whether any discrepancies of 10% or more in the aggregate for each class of inventory were noticed during physical verification of inventory and if so, whether they have been properly dealt with in the books of accounts.

4.

Sanctioned working capital limits during the year

Whether at any point of time during the year, the company has been sanctioned working capital limits in excess of Rs.5 crore, in aggregate from banks or financial institutions on the basis of security of current assets.

5.

Details of loans, advances, guarantees or security

Aggregate amount and balance outstanding at the balance sheet date with respect to loans or advances and guarantees or security to subsidiaries, joint ventures and associates and other parties.

6.

Short-term funds utilised for long-term purposes

Details of funds raised on short-term basis have been utilised for long-term purposes.

7.

Funds raised for subsidiaries, JV or associates

Details of funds taken by the company from any entity or person on account of or to meet the obligations of its subsidiaries, associates or joint ventures.

8.

Pledge of securities of subsidiaries, JV or associates

Details of loans raised by the company during the year on the pledge of securities held in its subsidiaries, joint ventures or associate companies and whether the company has defaulted in repayment of such loans.

9.

Fraud reporting to Central Government

Whether any report under section 143(12) of the Companies Act, 2013 has been filed by the auditors in Form ADT-4.

10.

Whistle-Blower complaints

Whether the auditor has considered whistle-blower complaints received during the year by the company.

11.

Adequacy of Internal Audit system

Whether the company has an internal audit system commensurate with the size and nature of its business and whether the reports of the Internal Auditors for the period under audit were considered by the statutory auditor.

12.

NBFC activities without any registration

Whether the company has conducted any NBFC or Housing Finance activities without a valid Certificate of Registration (CoR) from the Reserve Bank of India.

13.

Core Investment Company

Whether the company is a Core Investment Company (CIC), if so, whether it continues to fulfil the criteria of a CIC, and in case the company is an exempted or unregistered CIC, whether it continues to fulfil such criteria. Where the group has more than one CIC, number of CICs which are part of the Group.

14.

Cash Losses

The amount of cash losses incurred by the company in the financial year and in the immediately preceding financial year.

15.

Resignation of Auditor

Where there has been any resignation of the statutory auditors during the year, whether the auditor has taken into consideration the issues, objections or concerns raised by the outgoing auditors.

16.

Capacity to discharge current liabilities

Whether the company is capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date.

17.

Unspent CSR amount

Whether in respect of other than ongoing projects, the company has transferred unspent amount to CSR Fund within a period of six months of the expiry of the financial year and whether any amount remaining unspent, pursuant to any ongoing project, has been transferred to special account.

18.

Qualifications and adverse remarks by other auditors

Details of qualifications or adverse remarks by the respective auditors in the CARO reports of the companies included in the consolidated financial statements.