CLARIIFICATION ON AUDITOR'S REPORT IN RESPECT OF
FINANCIAL STATEMENTS OF A COMPANY FOR ACCOUNTING
YEARS BEGINNING BEFORE 1ST APRIL, 20141
1. The Ministry of Corporate Affairs vide its General Circular No 07/2014, Dissemination of
Information With Regards to the Provisions of the Companies Act, 2013 as Notified Till Date vis a vis
Corresponding Provisions of the Companies Act, 1956, dated 01st April 2014 had provided
information in respect of such sections of the Companies Act 1956 which will cease/continue to have
effect after 01st April 2014 (i.e. the date when a number of sections of the Companies Act 2013 came
into force).
2. Also, the Ministry of Corporate Affairs had on 04th April, 2014 issued a General Circular No.
8/2014 regarding "Commencement of provisions of the Companies Act 2013 with regard to
maintenance of books of accounts and preparations/adoption/filing of financial statements,
auditor's report, Board's report and attachments to such statements and reports- Applicability with
regard to relevant financial Year".
3. The aforesaid General Circular of 04th April 2014 inter alia, mentioned that "................... it is
hereby notified that the financial statements (and documents required to be attached thereto),
auditor's report and Board's report in respect of financial years that commenced earlier than 1st
April, 2014 shall be governed by the relevant provisions/ Schedules/ rules of the Companies Act, 1956
and that in respect of financial years commencing on or after 1st April, 2014, the provisions of the
new Act shall apply."
4. Also, such companies whose financial years ended at a date other than 31st March, are in
the process of aligning their financial year to meet the definition of "financial year" as per the
Companies Act, 2013.
5. The matters described in paragraph 1 above have given rise to a situation wherein, with
effect from 01st April 2014, the various documents, minutes and registers, etc., are being maintained
by companies in accordance with the provisions of the Companies Act, 2013. Consequently, in case
of companies whose financial years commenced before 31st March 2014 but would end on or before
31st March 2015, w.e.f. 01st April 2014, various documents, minutes and registers, etc., may not be
maintained in accordance with the provisions of the Companies Act, 1956 for such part of the
financial year that falls after 01st April 2014 (ie, the date when the Companies Act, 2013 comes into
force).
6. The aforesaid situation is giving rise to practical difficulties for the statutory auditors while
reporting in terms of certain provisions of section 227 of the Companies Act, 1956 in respect of the
companies described in paragraph 5 above since necessary documents, minutes and registers, etc.,
under the Companies Act, 1956 may not be available for such part of the financial year that falls
after 01st April 2014. Specifically, these difficulties relate to reporting under section 227(3)(f),
relating to disqualification of the Directors under section 274(1)(g) of the Companies Act 1956.
Similarly, problems would be faced while reporting on certain clauses of the Companies (Auditor's
1 This "Clarification" was approved by the Council of the Institute of Chartered Accountants of India at its 342 nd meeting
held on 15-16 April, 2015.
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Report) Order, 2003 (CARO 2003). For example, clause (iii) relating to loans to/from parties covered
in the register maintained under section 301 of the Companies Act 1956; or clause (v)(a) and (b)
relating to contracts or arrangements referred to in section 301 of the Companies Act 1956; or
clause (vi) relating to provisions of section 58A and 58AA of the Companies Act, 1956 relating to
acceptance of deposits from the public; or clause (viii) relating to maintenance of cost records; or
clause (xiv) relating to dealing or trade in shares, securities, debentures, other investments, etc vis a
vis inter alia, exemption under section 49 of the Companies Act, 1956 or clause (xviii) relating to
preferential allotment of shares to parties and companies covered in the register maintained under
section 301 of the Companies Act, 1956. It may also be noted that in terms of MCA's aforesaid
General Circular No 07/2014, of 01st April, 2014, sections 49, 58A, 58AA, 209, 274, 301 of the
Companies Act, 1956 cease to have effect from 01st April 2014.
7. It is, therefore, suggested that in case of aforesaid situation, the statutory auditors should
report on the relevant clauses only for that part of the financial year upto which the concerned
provisions of the Companies Act 1956 were in force (ie upto 31st March 2014). Also, the statutory
auditors should clearly bring out this fact in the relevant portions of their audit reports. An
illustrative manner of such disclosure is as follows:
"Other Matters
The Ministry of Corporate Affairs had on 01st April, 2014, vide its General Circular No.
07/2014, Dissemination of Information with Regards to the Provisions of the Companies
Act, 2013 as Notified Till date vis a vis Corresponding Provisions of the Companies Act,
1956, identified such sections of the Companies Act, 1956 that would cease/ continue
to have effect from 01st April 2014.
Accordingly, in terms of the aforesaid Circular, our reporting in respect of section
227(3)(f) of the Companies Act, 1956, and clauses (iii), (v)(a) and (b), (vi), (viii), (xiv),
(xviii) of the Companies (Auditor's Report) Order, 2003 (dealing with sections 49,
58A, 58AA, 209(1)(d) and 301 of the Companies Act, 1956) is only for the period
beginning from ie ................. (date) till 31st March 2014 since as per the aforementioned
MCA Circular these sections have ceased to have effect from 01st April, 2014."
8. This Announcement is effective from the date of its hosting on ICAI's website.
CA ABHIJIT BANDYOPADHYAY
Chairman, Auditing and Assurance Standards Board
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