The Ministry of Corporate Affairs (MCA) vide Notification dated 24th March, 2021, has issued ‘The Companies (Audit and Auditor) Amendment Rules, 2021’ to further amend the Companies (Audit and Auditors) Rules, 2014 (“Rules”). The amendments are effective from 1st April,2022
The following are the amendments:
Insertion of following 3 clauses to Auditor’s report (in addition to the other matters as specified in Rule 11)
“(e)
(i) Whether the management has represented that, to the best of it’s knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other person(s) or entity(ies), including foreign entities (“Intermediaries”), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(ii) Whether the management has represented, that, to the best of it’s knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been received by the company from any person(s) or entity(ies), including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing or otherwise, that the company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
(iii) Based on such audit procedures that the auditor has considered reasonable and appropriate in the circumstances, nothing has come to their notice that has caused them to believe that the representations under sub-clause (i) and (ii) contain any material mis-statement.
(f) Whether the dividend declared or paid during the year by the company is in compliance with section 123 of the Companies Act, 2013.
(g) Whether the company has used such accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all transactions recorded in the software and the audit trail feature has not been tampered with and the audit trail has been preserved by the company as per the statutory requirements for record retention.”
Omission of clause (d) of Rule 11 of the Rules relating to specified bank notes (demonetization)
“(d) whether the company had provided requisite disclosures in its financial statements as to holdings as well as dealings in Specified Bank Notes during the period from 8th November, 2016 to 30th December, 2016 and if so, whether these are in accordance with the books of accounts maintained by the company.”
The aforesaid MCA notification can be accessed at AuditAuditorsAmendmentRules_24032021.pdf (mca.gov.in)
The effective date for the above requirements are extended
Mandatory use of Accounting Software having Audit Trail Extended to 1st April, 2022
Link: http://mca.gov.in/Ministry/pdf/AccountsAmendmentRules_01042021.pdf
Consequently auditor responsibility to comment on the same, also extended to Financial Year Starting from 1st April, 2022
Link: http://mca.gov.in/Ministry/pdf/AuditAuditorsAmendmentRules_01042021.pdf
