Method of accounting

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 November 2013 Is there any provision under the income tax act or the companies act which states that it is mandatory for companies to follow the method of accounting stated by ICAI even though companies are following different method for recording the transactions.

Rahul Singhania

Rahul Singhania (Expert)
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08 November 2013 Yes, as per sec.227 of the Companies act which states that auditor has to report whether annual account comply with AS, otherwise he can qualify his report.
As per recent amendment in Company Act where National Financial Reporting authority (NFRA) to be constituted by Central Government to provide for dealing with matters relating to accounting and auditing policies and standards to be followed by companies and their auditors The functions of NFRA shall include: –

Make recommendations to CG on the formulation of accounting and auditing policies and
standards;

Monitor and enforce compliance with accounting and auditing standards;

Oversee the quality of service of the professions and suggest measures required for improvement
in quality of services and such other related matters as may be prescribed;

Perform other prescribed functions in relation to above as may be prescribed

Accounting treatment in the scheme of compromise and arrangement need to be compliant with the accounting standards and auditor’s certificate to that effect needs to be filed with NCLT.