Sign on audit report by the auditor
This query is : Resolved
28 June 2013
Dear Expert,
i have a query, company has registered under section 25 companies act 1956, the audited financial statement has not been signed till date, i would like to know is it possible to sign today and what would be the penalty and condition which i have to follow, pls make it clear in detail through example and also provide me the section which will clear my doubt.as soon as possible
thanks
i have a query, company has registered under section 25 companies act 1956, the audited financial statement has not been signed till date, i would like to know is it possible to sign today and what would be the penalty and condition which i have to follow, pls make it clear in detail through example and also provide me the section which will clear my doubt.as soon as possible
thanks
28 June 2013
Hi
Signing of balance sheet and profit and loss account:
In the case of a company other than a banking company, every balance sheet and every profit and loss account of a company shall be signed on behalf of the Board of directors by its manager or secretary, if
any, and by not less than two directors of the company one of whom shall be a managing director where there is one. However, in the case of a non-banking company, when only one of its directors is for the time being in India, the balance sheet and the profit and loss account shall be signed by such director; but in such a case there shall be attached to the balance sheet and the profit and loss account, a statement signed by him explaining the reasons for non-compliance with the provisions of section 215(1). Practically the following situations that may arise in regard to signing of balance sheet and profit and
loss account of a company, a proper care should be taken thereof:—
(i) If the company has a managing director but does not have a secretary, the balance sheet and profit and loss account shall be signed by (a) managing director and (b) one other director.
(ii) If the company has neither a manager nor a secretary nor a managing director, the balance sheet
and profit and loss account shall be signed by any two directors of the company.
(iii) If only one of the directors of a company or its managing director is for the time being in India, then he shall sign the balance sheet and profit and loss account and a statement signed by him explaining the reasons for non-compliance with section 215(1) shall be attached to the balance sheet and profit and loss account. Therefore, the signature by a manager or secretary and managing director is a must if the company has
such personnel.
Signing of balance sheet and profit and loss account:
In the case of a company other than a banking company, every balance sheet and every profit and loss account of a company shall be signed on behalf of the Board of directors by its manager or secretary, if
any, and by not less than two directors of the company one of whom shall be a managing director where there is one. However, in the case of a non-banking company, when only one of its directors is for the time being in India, the balance sheet and the profit and loss account shall be signed by such director; but in such a case there shall be attached to the balance sheet and the profit and loss account, a statement signed by him explaining the reasons for non-compliance with the provisions of section 215(1). Practically the following situations that may arise in regard to signing of balance sheet and profit and
loss account of a company, a proper care should be taken thereof:—
(i) If the company has a managing director but does not have a secretary, the balance sheet and profit and loss account shall be signed by (a) managing director and (b) one other director.
(ii) If the company has neither a manager nor a secretary nor a managing director, the balance sheet
and profit and loss account shall be signed by any two directors of the company.
(iii) If only one of the directors of a company or its managing director is for the time being in India, then he shall sign the balance sheet and profit and loss account and a statement signed by him explaining the reasons for non-compliance with section 215(1) shall be attached to the balance sheet and profit and loss account. Therefore, the signature by a manager or secretary and managing director is a must if the company has
such personnel.
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28 June 2013
Time factor of authentication of accounts and signing by auditors:
Where there is no time gap or very little time gap between the date of approval of accounts under section 215 by the Board of directors of a company and the date of the audit report thereon, the Department
is of the view that responsibility for the preparation of the accounts of a company belongs to the directors who have to approve them before the auditors make their report thereon. The Act is apparently silent on when the auditors may commence their work of audit. In other words, it does not clarify whether they have
simply to await the directors' report on the accounts or proceed with the audit work in the meantime immediately after their appointment at the last annual general meeting. The auditor's report comes at the
end of the audit process and section 215 mentions nothing of the process preceding the preparation of the audit report by the auditors. Further that section 227 of the Act, gives the powers to auditor to access at all times to the books and accounts and vouchers of the company, which amply suggests that they do not have to remain idle at any time after their appointment as auditors. Subject to the convenience of the company, he may actually commence the checking up of vouchers, etc., and the company may prepare trial balance sheets, etc., which will save time for the auditors in the preparation of their report in due course. Thus, if the auditor signs the balance sheet on the same date on which the directors have approved it, it may not be inferred from this solitary circumstance that the auditor has not performed the audit efficiently. [DCA Circular No. 7 of 1974, dated 26-4-1974].
Time factor of authentication of accounts and signing by auditors:
Where there is no time gap or very little time gap between the date of approval of accounts under section 215 by the Board of directors of a company and the date of the audit report thereon, the Department
is of the view that responsibility for the preparation of the accounts of a company belongs to the directors who have to approve them before the auditors make their report thereon. The Act is apparently silent on when the auditors may commence their work of audit. In other words, it does not clarify whether they have
simply to await the directors' report on the accounts or proceed with the audit work in the meantime immediately after their appointment at the last annual general meeting. The auditor's report comes at the
end of the audit process and section 215 mentions nothing of the process preceding the preparation of the audit report by the auditors. Further that section 227 of the Act, gives the powers to auditor to access at all times to the books and accounts and vouchers of the company, which amply suggests that they do not have to remain idle at any time after their appointment as auditors. Subject to the convenience of the company, he may actually commence the checking up of vouchers, etc., and the company may prepare trial balance sheets, etc., which will save time for the auditors in the preparation of their report in due course. Thus, if the auditor signs the balance sheet on the same date on which the directors have approved it, it may not be inferred from this solitary circumstance that the auditor has not performed the audit efficiently. [DCA Circular No. 7 of 1974, dated 26-4-1974].
28 June 2013
Penalty for non-compliance of section 220:
If default is made in complying with section 220(1) and (2), the company, and every officer of the company who is in default, shall be punishable with fine, which may extend to five hundred rupees for
every day during which the default continues. [Section 220(3)]
It has been held in the case of Ravindra Narayan v Registrar of Companies (1994) 2 SCL 281 (Raj), that where there is a managing director of company, other directors cannot be held to be falling within the expression 'officer who is in default' in section 5 and cannot be held liable for default in complying with
requirements of sub-sections (1) and (2) of section 220.
Where directors failed to file balance sheet and profit and loss accounts despite notice, it was decided that any director of the company who is knowingly guilty of the default would be an 'officer in default'
under section 5 read with section 2(30). [Bachrenj Baid v State of West Bengal Case No. 809 (Kol) 92].
In the case of Alim Ahuja and Another v Registrar of Companies (2006) 129 Comp Cas 104 (Raj), the Registrar of Companies sent notices to the directors calling upon them to show cause as to why action should not be taken for their prosecution for contravention of section 159/160/162/220 and as to why they should not be prosecuted under Section 210(5) of the Act, for the default in complying with section 210(3)
of the Act. On receipt of these notices, the petitioners filed application to High Court for grant of relief under section 633 of the Act instead of showing cause to the ROC praying that they were not active
directors of the company and are being not connected with the management of the company.
The Court held that that the plaintiffs have voluntarily continued as directors of the company. The Board of Directors has never resolved to exempt them from their responsibility and duty as directors to
comply with the provisions of the Act. It is hardly of any substance that petitioners are senior citizens. They had accepted the directorship voluntarily and presumed to have known of their responsibility, obligation, liability and duty under the Act.
It was further held that rather than approach to this Court at this stage they should have placed their cases for consideration before the respondent but that has not been done. That apart the notices have been given only for launching the prosecution against the petitioners and in their prosecution they can take all
these defences and where they are able to prove the same the Court may not punish them for violation of provisions of the Act.
Penalty for non-compliance of section 220:
If default is made in complying with section 220(1) and (2), the company, and every officer of the company who is in default, shall be punishable with fine, which may extend to five hundred rupees for
every day during which the default continues. [Section 220(3)]
It has been held in the case of Ravindra Narayan v Registrar of Companies (1994) 2 SCL 281 (Raj), that where there is a managing director of company, other directors cannot be held to be falling within the expression 'officer who is in default' in section 5 and cannot be held liable for default in complying with
requirements of sub-sections (1) and (2) of section 220.
Where directors failed to file balance sheet and profit and loss accounts despite notice, it was decided that any director of the company who is knowingly guilty of the default would be an 'officer in default'
under section 5 read with section 2(30). [Bachrenj Baid v State of West Bengal Case No. 809 (Kol) 92].
In the case of Alim Ahuja and Another v Registrar of Companies (2006) 129 Comp Cas 104 (Raj), the Registrar of Companies sent notices to the directors calling upon them to show cause as to why action should not be taken for their prosecution for contravention of section 159/160/162/220 and as to why they should not be prosecuted under Section 210(5) of the Act, for the default in complying with section 210(3)
of the Act. On receipt of these notices, the petitioners filed application to High Court for grant of relief under section 633 of the Act instead of showing cause to the ROC praying that they were not active
directors of the company and are being not connected with the management of the company.
The Court held that that the plaintiffs have voluntarily continued as directors of the company. The Board of Directors has never resolved to exempt them from their responsibility and duty as directors to
comply with the provisions of the Act. It is hardly of any substance that petitioners are senior citizens. They had accepted the directorship voluntarily and presumed to have known of their responsibility, obligation, liability and duty under the Act.
It was further held that rather than approach to this Court at this stage they should have placed their cases for consideration before the respondent but that has not been done. That apart the notices have been given only for launching the prosecution against the petitioners and in their prosecution they can take all
these defences and where they are able to prove the same the Court may not punish them for violation of provisions of the Act.
30 June 2013
Pl guide if revised schedule VI is applicable to section 25 companies, The Indian Silk Export Promotion Council, who gets financial assistance from government
The previous auditor who signed 31.3.2012 has prepared and signed in T format
The previous auditor who signed 31.3.2012 has prepared and signed in T format
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