Financial Daily from THE HINDU group of publications
Saturday, Nov 23, 2002
Unpaid dividends, matured deposits, debentures Auditors may have to attest co declaration
NEW DELHI, Nov. 22
AUDITORS may soon be required to certify the correctness of management's disclosure on unpaid dividends, unpaid matured deposits and debentures to the Investor Education & Protection Fund (IEPF) in the financial statements of companies.
The Department of Company Affairs (DCA) has now suggested to the Expert Group that reviewed the Manufacturing and Other Companies (Auditors Report) order (Maocaro) to consider incorporation of this requirement in its report. The Expert Group, headed by Mr Amarjit Chopra, Council Member of the Institute of Chartered Accountants of India (ICAI), had recently submitted its report to DCA.
Maocaro is a special order issued by the CLB in terms of Section 227 (4A) of the Companies Act, 1956, requiring the auditor's report in certain class of companies to include a statement on matters pertaining to the functioning of the company (for e.g., the auditors have to certify whether a manufacturing company is sick or not at the time of signing of balance sheet).
"No formal communication has been sent to the Expert Group for reviewing its report, but after deliberations between the Department and the group it was found that there were certain suggestions which could be incorporated. We are taking the report back to the group to consider the suggestions," official sources told Business Line.
Maocaro needed a review in the light of recent experiences of the department on disclosures made by auditors in their reports. With a view to make changes comprehensively, a group was set up under the chairmanship of Mr Amarjit Chopra.
"Maocaro needed a change since the whole corporate environment and public expectations was undergoing a change. Besides, the main purpose of audit report is to give a true and fair view of the company to the shareholders."
Further, the need for change was also felt in order to harmonise the accounting standards brought out by the ICAI with Schedule VI of the Companies Act, 1956. The Schedule prescribes the format of balance sheet and profit and loss accounts that managements of companies need to prepare under the Act.
Some of the suggestions made by the expert group include exempting the companies with paid-up capital of Rs 25 lakh from compliance with Maocaro order.
The group was also of the view that there was no need to distinguish the companies as per their classification. It was felt that size of a company could be a better parameter and therefore the report has suggested that size of the companies should be the basis for requiring auditors to conform to the Maocaro order.
Besides the view that classification should be done away with, the nomenclature of the order may undergo change as Maocaro only dealt with manufacturing companies.
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