Accounting standards

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 November 2012 As per AS 2 "Valuation of inventories" ,in Annual Report the company had to mention the cost accounting formulas, treatment of Raw Materials , WIP and Finished goods , there treatment in the books, valuation of inventories and other necessary details.If company fails in showing these details in annual report what are its consequences? How it will impact the Audit report and Directors Responsibility Statement as given by directors.

Shudhanshu Agrawal

Shudhanshu Agrawal (Expert)
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19 November 2012 According to section 211(3A) of Companies Act, 1956 every company is required to comply with the accounting standards. If any company does not comply with the accounting standard, the auditor is required to qualify the report.

According to section 217(2AA) BOD is required to make a Director's Responsibility Statement indicating that accounts are prepared in accordance with the accounting standards. However, if there is any departure from the accounting standards then proper explanation is also required for such material departure. In the given situation accounting standards are not followed properly by the management. Hence a statement shall be made by the management mentioning the reasons for non compliance.