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Inter Corporate transaction [rpt] not in auditors report

Stat Audit 105 views 1 replies

Jayanta Bandyopadhyay

385 Points Joined June 2021

We are an unlisted public ltd co and our bulk sale is to LLP, Also owned by the same family members. However, for arm length price, we follow auction rate for 3 rd parties.

Auditors of both the entities are separate but do not mention anything about RPT. FURTHER Auditors of LLP are not giving UDIN.

IS everything correct? Please guide.

Replies (1)

Rama chary Rachakonda

Master in Accounts & high court Advocate

9047 Points Joined December 2011

Related Party Transactions (RPTs) As an unlisted public limited company, you are required to comply with the provisions of the Companies Act, 2013, and the Income-tax Act, 1961, regarding RPTs:

1. _Arm's length pricing_: You are following the correct approach by using auction rates for third-party transactions as a benchmark for arm's length pricing.

2. _Disclosure requirements_: Ensure that you disclose the RPTs in the financial statements of both the companies, as required under Accounting Standard (AS) 18 and the Companies Act, 2013. Auditor Requirements Regarding the auditor requirements:

1. _Auditor's report_: The auditors of both companies should have reported on the RPTs in their audit reports, as required under the Companies Act, 2013.

2. _UDIN requirement_:

The Institute of Chartered Accountants of India (ICAI) requires auditors to obtain a Unique Document Identification Number (UDIN) for every audit report and certificate issued.

The auditors of the LLP should obtain a UDIN for their audit report.

Corrective Action To ensure compliance:

1. _Disclose RPTs_: Ensure that the RPTs are disclosed in the financial statements of both companies.

2. _Auditor's report_: Request the auditors to report on the RPTs in their audit reports.

3. _UDIN requirement_: Request the auditors of the LLP to obtain a UDIN for their audit report.

Additional Considerations

1. _Compliance with Companies Act, 2013_: Ensure compliance with the provisions of the Companies Act, 2013, regarding RPTs.

2. _Tax implications_: Consider the tax implications of the RPTs and ensure compliance with the Income-tax Act, 1961.

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