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Suggestions in relation to certain sections of companies Act, 2013

Snehal Parikh 
on 05 February 2016

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Important points in relation to notes to accounts of financial statements under revised schedule VI or suggestions in relation to certain sections of companies Act, 2013

The Company should disclose as per revised schedule VI  following information in relation to payment to auditor  as (a) auditor,(b) for taxation matters(c) for company law matters, (d) for management services, (for other services, (f) for reimbursement of expenses. In this regard, I have found in financial statements of many listed companies that the company should disclose the payment to auditor as auditor for statutory audit or cost audit, if applicable. (Refer point (a) as auditor in relation to payment to auditor). As nowadays, the internal audit as per section-138 of Companies Act,2013 and also Secretarial audit as per Section-204 of Companies Act,2013 are compulsory to companies as per respective sections and as per their applicability.

Here, the management of majority companies considers payment to auditor as auditor only for statutory audit and cost audit as applicable. The word payment to auditor as auditor should be taken in broader meaning that the payment to auditor as auditor for all audits which are applicable compulsory as per relevant statues of Companies Act, 2013 which shows more transparency to notes to accounts in this regard to all stakeholders of concerned company. In this regard, any clarification by MCA will be helpful to management of company as well as concerned auditors while preparation/review of financial statements in this regard as applicable.

Important Points of applicability of Internal Audit as per Section-138 of Companies Act, 2013

As per Section-138 of Companies Act, such class or 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 to conduct internal audit of the functions and activities of the company. As the act allows the chartered accountant in practice or in employment to do internal audit of companies. Another point is that such other professional as may be decided by the Board to conduct internal audit.

As for independency of audit, is it possible for chartered accountant in employment to clearly bring all facts in relation to internal functions or activities of the company to board of directors?

The another point is that the act allows any other professional as may be decided by the Board to conduct internal audit. In this regard any clarification by MCA for above two points will be helpful to management of company not only for the purpose of independency of audit but also to maintain creditability and transparency of financial statements.

Company Secretary in Practice appointed under Section-204 of Companies Act, 2013

At present, Section-139 to 142 and 144 of Companies Act, 2013 are not applicable to Secretary Audit. It is possible that the Company secretary as consultant to Company can also work as Secretary Auditor if permitted by Company.

For better transparency and independency of financial statements to all stakeholders of the Company, any clarifications by MCA in this regard about applicability of Section-139 to 142 and 144 of Companies Act, 2013 to Company Secretary appointed as Secretarial Auditor under Section-204 of Companies Act,2013 will be immensely helpful to all stakeholders of the Company.


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Snehal Parikh 

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