Accounts and Auditors

International Financial Services Centre (IFSC) is a hub of financial services within a country which has laws and regulations different from the rest of the country. Usually, these centres have low tax rates and flexible regulations for securities and currency trading, banking and insurance, which make them attractive for foreign investment. It can be said that these centres deal mainly with the flow of money, financial product and services across borders.

As stipulated under Clause 41 of Section 2 of the Companies Act 2013, in case of Specified IFSC Public/ Private Company, which is a subsidiary of a foreign company, the financial year of the subsidiary may be same as the financial year of its holding company and approval of the Tribunal shall not be required.

Accordingly, MNO-IFSC, being a subsidiary of Lee Ltd., of Japan, a holding company established in SEZ of India can also follow the calendar year as financial year as followed by its holding company without requiring to take any approval of the National Company Law Tribunal.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 4(a) (Old syllabus).

Books of Account in respect of branch office

As per Section 128(2) and (3) of the Companies Act, 2013 read with rule 4(1) of the Companies (Accounts Rules) 2014, proper summarized return of the books of account of the company kept and maintained outside India shall be sent to the registered office at quarterly intervals, which shall be kept and maintained at the registered office of the company and which shall be kept open to directors for inspection.

As per rule 4 of the Companies (Accounts) Rules, 2014 where any other financial information maintained outside the country is required by a director, the director shall furnish a request to the company setting out the full details of the financial information sought and the period for which the information is sought.

The company shall produce such financial information to the director within 15 days of the date of receipt of the written request. The financial information required by the director shall be sought for by the director himself and not by or through his holder of power of attorney or agent or any representative.

In the light of the above provisions and the rule, the director concerned has a right to seek any other financial information maintained outside the country by giving a proper request with full details of the information sought. Hence, the contention of the Board is not correct and its decision to deny the information is not valid.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 1(c) (Syllabus 2022).

According to section 128(6) of the Companies Act, 2013, the following persons are responsible to take all reasonable steps to secure compliance by the company with the requirement of maintenance of books of accounts etc.

i.Managing Director,

ii.Whole-Time Director, in charge of finance

iii.Chief Financial Officer; or

iv.Any other person of a company charged by the Board with duty of complying with provisions of section 128.

Penalty

In case the aforementioned persons referred to in Section 128(6) of the Act contravene such provisions, they shall in respect of each offence, be punishable shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 2A(iii) (Syllabus 2017).

Pursuant to Rule 3(6) of the Companies (Accounts) Rules, 2014 the company shall, where books of account are maintained in electronic mode, intimate to the Registrar on an annual basis at the time of filing of financial statement —

a)the name of the service provider;

b)the internet protocol address of service provider;

c)the location of the service provider (wherever applicable);

d)where the books of account and other books and papers are maintained on cloud, such address as provided by the service provider.

e)where the service provider is located outside India, the name and address of the person in control of the books of account and other books and papers in India.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 2(b) (Syllabus 2017).

Section 128(1) of the Companies Act, 2013 read with rule 2A of the Companies (Accounts) Rules, 2014, requires every company to prepare and keep the books of accounts and other relevant books and papers and financial statements at its registered office. However, all or any of the books of accounts may be kept at such other place in India as the Board of Directors may decide. When the Board so decides, the company is required within seven days of such decision to file with the Registrar of Companies (RoC) a notice in writing giving full address of that other place. Such intimation is to be made in form AOC-5 to the Registrar of Companies.

Thus, in the given case the objection of the Company Secretary is not in accordance with the above provisions of the Companies Act, 2013 and hence not valid. Fine Industry Ltd., can keep its books of accounts at its Singrauli manufacturing unit by following the mentioned process.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 2A(iv) (Syllabus 2017).

Section 128(1) of the Companies Act, 2013 requires every company to prepare and keep the books of accounts and other relevant books and papers and financial statements for every financial year at its registered office.

However, all or any of the books of accounts and other relevant papers may be kept at such other place in India as the Board of Directors may decide. When the Board so decides, the company shall, within 7 days of such decision, file with the Registrar of Companies, a notice in writing giving full address of that other place. Such intimation is to be made in e-form AOC 5 to the Registrar of Companies.

Therefore, Board of Directors of the company may decide any place, other than the Registered office of the company for keeping the books of accounts.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 2(b) (Syllabus 2017).

Section 128 of the Companies Act, 2013 deals with provisions relating to maintenance of Books of accounts by the company. According to sub section (6) of section 128 if the Managing Director, the Whole-Time Director in charge of finance, the Chief Financial Officer or any other person of a company charged by the Board with the duty of complying with the provisions of section 128, fails to comply with the provisions shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees or with both.

Accordingly it is the responsibility of the Chief Financial Officer along with Managing Director and whole time director in charge of finance of the company to maintain the Books of Accounts of the company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2018, Q. 1(d) (Syllabus 2017).

(a)The persons responsible to take all reasonable steps to secure compliance by the company with the requirement of Section 129(7) of the Companies Act 2013, are:

(i)Managing Director;

(ii)Whole-Time Director in charge of finance;

(iii)CFO;

(iv)Other person of a company charged by the Board with the duty of complying with the requirements of section 129.

Where any of the aforementioned officers are absent, all the directors shall be responsible and punishable.

Therefore, as there is no whole-time director in charge of finance in the company all the directors including MD and CFO will be held responsible and punished. Hence, Mr. Varun CFO and Mr. Prateek, MD will be held responsible and punished.

(b)Pursuant to Rule 3 of the Companies (Filing of Documents and Forms in XBRL) Rules, 2015 the following class of companies shall file their financial statements and other documents under section 137 of the Companies Act, 2013 with the Registrar in e-Form AOC-4 XBRL:

(i)companies listed with stock exchanges in India and their Indian subsidiaries;

(ii)companies having paid up capital of five crore rupees or above;

(iii)companies having turnover of one hundred crore rupees or above;

(iv)all companies which are required to prepare their financial statements in accordance with Companies (Indian Accounting Standards) Rules, 2015.

The companies which have filed their financial statements under sub-rule (1) of Rule 3 of XBRL Rules, shall continue to file their financial statements and other documents though they may not fall under the class of companies specified therein in succeeding years.

Hence, unlisted company Resham Cements Ltd. has to continue filing financial statements in XBRL mode in current FY 2023-24 also. The view of accountant of the company is not tenable

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 4A(i) (Syllabus 2022).

Consolidated Financial Statement

The Companies Act, 2013 has made preparation of consolidated accounts mandatory for all companies including unlisted companies and private companies having one or more subsidiaries or associates or joint ventures.

According to sub-section 3 of the section 129 of the Companies Act, 2013, where a company has one or more subsidiaries or associates. It shall, in addition to its financial statements for the financial year, prepare a consolidated financial statement of the company and of all the subsidiaries and associates companies in the same form and manner as that of its own and in accordance with applicable accounting standard, which shall also be laid before the annual general meeting of the company along with the laying of its financial statement.

Rule 5 of the Companies (Accounts) Rules, 2014, the company shall also attach along with its financial statement, a separate statement containing the salient features of the financial statement of its subsidiary/ies or associate/s or joint venture/s in Form AOC-1.

The provisions of the Companies Act, 2013 applicable to the preparation, adoption and audit of the financial statements of a holding company shall, mutatis mutandis, apply to the consolidated financial statements referred to in Section 129 (3).

Abridged Financial Statement

In the case of a company whose shares are listed on a recognised stock exchange, provisions of section 136 shall be deemed to have been complied with, if the copies of the documents are made available for inspection at its registered office, during working hours, for a period of twenty-one days before the date of the meeting and a statement containing the salient features of such documents in the prescribed form Form AOC-3 or copies of the documents, as the company may deem fit, is sent to every member of the company and to every trustee for the holders of any debentures issued by the company not less than twenty-one days before the date of the meeting.

The Companies which are required to comply with Companies (Indian Accounting Standards) Rules, 2015 shall forward their statement in Form AOC-3A.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 2(b) (Old syllabus).

The consolidation of financial statements of the company shall be made in accordance with the provisions of Schedule III of the Act and the applicable accounting standards:

Provided that in case of a company covered under sub-section (3) of section 129 of Companies Act, 2013 which is not required to prepare consolidated financial statements under the Accounting Standards, it shall be sufficient if the company complies with provisions on consolidated financial statements provided in Schedule III of the Act.

The contention of the Auditor is justifiable as Section 129 (3) provides for not preparing the consolidated financial statement if conditions are fulfilled. Which according to second proviso to rule 6 are as under:

Provided further that nothing in this rule shall apply in respect of preparation of consolidated financial statements by a company if it meets the following conditions:-

(i)it is a wholly-owned subsidiary, or is a partially-owned subsidiary of another company and all its other members, including those not otherwise entitled to vote, having been intimated in writing and for which the proof of delivery of such intimation is available with the company, do not object to the company not presenting consolidated financial statements;

(ii)it is a company whose securities are not listed or are not in the process of listing on any stock exchange, whether in India or outside India; and

(iii)its ultimate or any intermediate holding company files consolidated financial statements with the Registrar which are in compliance with the applicable Accounting Standards.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 2A(v) (Syllabus 2017).

As per provisions of sub-sections (1) and (2) of section 129 of the Companies Act 2013, every financial statement of ‘the company must give true and fair view of the state of affairs of the company at the end of financial year. True and Fair view in respect of financial statement means-

•Financial statements and items contained should comply with accounting standards notified under section 133;

•Financial statement shall be in form or forms as provided for different class or classes of companies in Schedule III;

•Financial statement shall not be treated as not disclosing a true and fair view of the state of affairs of the company, merely by the reason of the fact that they do not disclose-

-in the case of an insurance company, any matters which are not required to be disclosed by the Insurance Act, 1938,or the Insurance Regulatory and Development Authority Act, 1999;

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 1(b) (Syllabus 2017).

According to Section 129(3) of the Companies Act, 2013, where a company has one or more subsidiaries or associates or joint ventures, it shall, in addition to its financial statement for the financial year, prepare a consolidated financial statement of the company of all the subsidiaries or associates or joint ventures in the same form and manner as that of its own which shall also be laid before the annual general meeting of the company along with the laying of its financial statement. The company is also required to attach along with the financial statement, a separate statement containing the salient features of the financial statement of the subsidiaries/associates/joint ventures in Form AOC-1

In the given case, based on the above provision the EFG Pvt. Ltd, being a holding company of the HIJ Ltd and KML Ltd. is required to prepare a consolidated financial statement with its subsidiaries and lay it before the AGM of the company. The company is also required to attach a separate statement containing the salient features of the financial statement of the HIJ Ltd and KML Ltd in Form AOC-1

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 2A(iii) (Old syllabus).

Section 129 (1) of Companies Act, 2013 states that the financial statements shall give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards notified under section 133 and shall be in the form or forms as may be provided for different class or classes of companies in Schedule III.

The proviso to aforesaid section provides that nothing contained in Section 129(1) of Companies Act, 2013 shall apply to any insurance or banking company.

Further exemption has been granted to banking and insurance companies by providing that the financial statements shall not be treated as not disclosing a true and fair view of the state of affairs of the company, merely by reason of the fact that they do not disclose:

(a)in the case of an insurance company, any matters which are not required to be disclosed by the Insurance Act, 1938, or the Insurance Regulatory and Development Authority Act, 1999;

(b)in the case of a banking company, any matters which are not required to be disclosed by the Banking Regulation Act, 1949;

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2018, Q. 1(b) (Old syllabus).

Section 130 of the Companies Act 2013, provides for provisions relating to re-opening of books of account or re-casting of its financial statements of the company. Accordingly,

(i)A company shall not re-open its books of account and shall not recast its financial statements, unless an application to the tribunal or by court of competent jurisdiction, in this regard is made by any one or more of the following -

(a)the Central Government, or

(b)the Income-tax authorities, or

(c)the Securities and Exchange Board of India (SEBI), or

(d)any other statutory regulatory body or authority or any person concerned, and

(e)An order in this regard is made by a court of competent jurisdiction or the Tribunal.

(ii)The re- opening and recasting of financial statements is permitted only for the following reasons –

(a)the relevant earlier accounts were prepared in a fraudulent manner; or

(b)The affairs of the company were mismanaged during the relevant period, casting a doubt on the reliability of financial statements.

(iii)The Tribunal shall give the notice to-

(a)the Central Government,

(b)the Income-tax authorities,

(c)the Securities and Exchange Board,

(d)any other statutory regulatory body or authority concerned or any other person concerned and shall take into consideration the representations, if any, made by Central Government or the authorities, Securities and Exchange Board or the body or authority concerned or any other person concerned before passing any order under this section.

(iv)The accounts so revised or re-cast under this section shall be final.

No order shall be made under Section 130 (1) of Companies Act, 2013 in respect of re-opening of books of account relating to a period earlier than eight financial years immediately preceding the current financial year.

Provided that where a direction has been issued by the Central Government under the proviso to sub-section 5 of section 128 of the Companies Act, 2013 for keeping of books of account for a period longer than eight years, the books of account may be ordered to be re-opened within such longer period.

The Central Government is the competent authority to make an application to the Tribunal for re-opening of the accounts and re-casting of the financial statements for the financial year 2020- 21. The company’s relevant earlier accounts were prepared in a fraudulent manner which is a permitted ground for moving an application by the Central Government and issuing the order by the Tribunal. The application is sought for re-opening of the accounts for 2020-21 which is the 4th year preceding to the current financial year 2024-25 and it is within the block of permitted 8 years preceding to the current financial year. Hence, it is feasible that the Central Government can make an application to the Tribunal and the Tribunal may order for re-opening of accounts and re-casting of financial statements for the financial year 2020-21.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 3(b) (Syllabus 2022).

As per Section 132 of the Companies Act, 2013 read with the National Financial Reporting Authority Rules 2018, the Central Government has introduced a new regulatory authority named as National Authority for Financial Reporting known as National Financial Reporting Authority (NFRA) with wide powers to recommend, enforce and monitor the compliance of accounting and auditing standards.

The objectives of National Financial Reporting Authority inter alia shall be as follows:

(1)make recommendations to the Central Government on the formulation and laying down of accounting and auditing policies and standards for adoption by companies or class of companies or their auditors, as the case may be;

(2)monitor and enforce the compliance with accounting standards and auditing standards in such manner as may be prescribed;

(3)oversee the quality of service of the professions associated with ensuring compliance with such standards, and suggest measures required for improvement in quality of service and such other related matters as may be prescribed; and a

(4)perform such other functions as may be prescribed in relation to aforementioned objectives.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 2(e) (Syllabus 2017).

The Central Government has introduced a new regulatory authority named as National Authority for Financial Reporting known as National Financial Reporting Authority (NFRA) with wide powers to recommend, enforce and monitor the compliance of accounting and auditing standards. The Companies Act, 1956 empowered the Central Government to form a Committee for recommendations on Accounting Standards which is National Advisory Committee on Accounting Standards (NACAS). This is now being renamed with enhanced independent oversight powers and authority as National Financial Reporting Authority (NFRA).The National Financial Reporting Authority shall perform its functions through such divisions as may be prescribed.

NFRA shall be responsible for monitoring and enforcing compliance of auditing and accounting standards and for that purpose, oversee the quality of professions associated with ensuring such compliances. The Authority has power to investigate professional and other misconducts which may be committed by Chartered Accountancy members and firms. There is also a provision for appellate authority.

The National Financial Reporting Authority is a quasi – judicial body to regulate matters related to accounting and auditing. With increasing demand of non-financial reporting, it may be referred to as a National level business Reporting Authority to regulate standards of all kind of reporting, financial as well as non – financial, by the companies in future.

National Financial Reporting Authority gives its recommendations on accounting standards and auditing standards. It can only recommend and it is the Central Government who prescribes such standards.

The objectives of National Financial Reporting Authority are as follows:

(1)Make recommendations on formulation of accounting and auditing policies and standards for adoption by companies, class of companies or their auditors;

(2)Monitor and enforce the compliance with accounting standards and auditing standards;

(3)Oversee the quality of service of professionals associated with ensuring compliance with such standards and suggest measures required for improvement in quality of service; and

(4)Perform such other functions as may be prescribed in relation to aforementioned objectives.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 1(c) (Syllabus 2017).

According to section 134(1) of the Companies Act, 2013 the financial statement, including Consolidated financial statement, if any, shall be approved by the Board of Directors before they are signed on behalf of the Board by:

(a)The chairperson of the company where he is authorized by the Board; or

(b)Two directors out of which one shall be managing director, if any; and

(c)The Chief Executive Officer, the Chief Financial Officer and the Company Secretary of the company, wherever they are appointed.

Further, section 134(6) of the Companies Act, 2013 provides that the Board’s report and any annexures thereto shall be signed by its chairperson of the company if he is authorised by the Board and where he is not so authorised, shall be signed by at least two directors, one of whom shall be a managing director, or by the director where there is one director.

In given case, the Balance Sheet and Profit & Loss Account have been signed by Mr. A and Mr. B, the directors. In view of the provisions of Section 134(1) of the Act, the Managing Director Mr. R should be one of the two signatories. Since, the company has also employed a full time Secretary, he should also sign the Balance Sheet and Profit & Loss Account. Boards Report is required to be signed by the chairperson of the company or by the two directors, one of whom shall be the managing director, in this case Mr. R being the managing director and any of other director (A or B or C or D) can sign the Board Report. Therefore, authentication done by two directors (i.e. Mr. A and Mr. B) is not valid.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 2(d)(i) (Syllabus 2022).

As per section 134(1) of the Companies Act, 2013, in case of a One Person Company, the financial statements shall be signed by only one director, for submission to the auditor for his report thereon.

In the given case, the financial statements including Balance Sheet and Statement of Profit & Loss and Board’s Report should be signed by one director and hence, the authentication is in order.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 2(d)(ii) (Syllabus 2022).

Fourth proviso to section 137(1) of the Companies Act, 2013 requires that a company shall attach along with its financial statements to be filed with the Registrar, the accounts of its subsidiary(ies) which have been incorporated outside India and which have not established their place of business in India.

Ministry of Corporate Affairs vide its General circular 11/2015 dated 21 July, 2015 has clarified the issue raised in question.

Clarification has been sought on: Whether a company covered under above provisions can place/file unaudited accounts of a foreign subsidiary if the audit of such foreign subsidiary is not a mandatory legal requirement in the country where such foreign subsidiary has been incorporated and such audit has not been conducted. and:

The matter has been examined in the Ministry and it is clarified that in case of a foreign subsidiary, which is not required to get its accounts audited as per legal requirements prevalent in the country of its incorporation and which does not get such accounts audited, the holding / parent Indian company may place / file such unaudited accounts to comply with requirements of Section 136(1) and 137(1) as applicable. These, however, would need to be translated in English if the original accounts are not in English Further, the format of accounts of foreign subsidiaries should be, as far as possible, in accordance with requirements under Companies Act, 2013. In case this is not possible, a statement indicating the reasons for deviation may be placed / filed along with such accounts.

In view of the above, if Strong Ltd. decides to get the accounts of the subsidiary company incorporated in Korea audited by its own auditor, it can do so provided:

a)The accounts of the subsidiary company abroad are translated in English, if the original accounts are not in English; and

b)the format of accounts of foreign subsidiary should be, as far as possible, in accordance with requirements under Companies Act, 2013. In case this is not possible, a statement indicating the reasons for deviation may be placed / filed along with such accounts of Strong Ltd.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 1(b) (Syllabus 2017).

As per Rule 3 of the Companies (Filing of Documents and Forms in XBRL) Rules, 2015, the companies which have filed their financial statements as per XBRL taxonomy for the previous financial year under Rule 3(1) of the said Rules shall continue to file their financial statements and other documents in XBRL taxonomy though they may not fall under the class of companies specified therein in succeeding years.

Hence, as per the above provisions ABC Ltd. though has not satisfied any conditions specified as per Section 137 of the Companies Act, 2013 for current financial year, yet the company is required to file financial statements as per XBRL Taxonomy for the current financial year as it has filed the financial statements as per XBRL Taxonomy for the previous financial year.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 2A(iv) (Syllabus 2017).

Section 137(1) of Companies Act, 2013 requires that a company shall attach along with its financial statements to be filed with the Registrar, the accounts of its subsidiary(ies) which have been incorporated outside India and which have not established their place of business in India.

In case of a foreign subsidiary, which is not required to get its accounts audited as per legal requirements prevalent in the country of its incorporation and which does not get such accounts audited, the holding / parent Indian company may place / file such unaudited accounts to comply with requirements of Section 137(1) as applicable. These, however, would need to be translated in English, if the original accounts are not in English Further, the format of accounts of foreign subsidiaries should be, as far as possible, in accordance with requirements under Companies Act, 2013. ln case this is not possible, a statement indicating the reasons for deviation may be placed / filed along with such accounts.

In light of above, there is no legal requirement for Star Ltd to get the accounts audited of the subsidiary incorporated in Brazil, however, the company may get accounts of its subsidiary audited for its satisfaction. Nowhere does the law prohibit the same.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2018, Q. 3(d) (Old syllabus).

As per section 138 of the Companies Act, 2013 read with rule 13 of the Companies (Accounts) Rules, 2014:

The following class of companies shall be required to appoint an internal auditor which may be either an individual or a partnership firm or a body corporate namely:

(a)Every listed company;

(b)Every unlisted public company having –

i.Paid up share capital of fifty crore rupees or more during the preceding financial year; or

ii.Turnover of two hundred crore rupees or more during the preceding financial year; or

iii.Outstanding loans or borrowings from banks or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year; or

iv.Outstanding deposits of twenty-five crore rupees or more at any point of time during the preceding financial year; and

(c)Every private company having –

i.Turnover of two hundred crore rupees or more during the preceding financial year; or

ii.Outstanding loans or borrowings from banks or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year.

Applying the above prescriptions:

Internal audit is applicable to AB Ltd. as it is a listed company;

Internal audit is not applicable to CD Private Ltd. as limits are not exceeded for turnover or outstanding loans;

It is applicable to EF Ltd. as outstanding deposits is more than ₹25 crore.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 4(b) (Syllabus 2022).

(i)Mandatory appointment of Internal Auditor:

As per Section 138 of Companies Act, 2013 read with Rule 13(1)(c) of the Companies (Accounts) Rules, 2014-

Every private company having –

(i)Turnover of two hundred crore rupees or more during the preceding financial year; or

(ii)Outstanding loans or borrowings from banks or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year.

From the above provision the criteria of paid-up share capital or outstanding deposits is not applicable to private company. RK Info Pvt. Ltd. is a private company having turnover of Rs. 180 crore which is less than the stipulated limit of Rs. 200 crores.

Hence, it is not mandatory for RK Info Pvt. Ltd. to appoint an internal auditor.

(ii)Appointment of whole-time company secretary as an internal auditor:

As per section 138 read with explanation to rule 13 of the Companies (Accounts) Rules, 2014 the internal auditor may or may not be an employee of the company. Hence, a company secretary in whole-time employment can be appointed internal auditor of the same company, if so, decided by the Board.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 2(c) (Syllabus 2022).

As per the provisions of section 138 of the Companies Act, 2013 the correct answer is as under:

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2022, Q. 2(a) (Syllabus 2017).

Section 138 of the Companies Act, 2013 read with Rule 13 of the Companies(Accounts) Rules, 2014, prescribes the following class of companies which is required to appoint an internal auditor namely:-:

(a)Every listed company;

(b)Every unlisted public company having:

(i)paid up share capital of Rs.50 crore or more during the preceding financial year; or

(ii)turnover of Rs.200 crore or more during the preceding financial year; or

(iii)Outstanding loans or borrowings from banks or public financial institutions exceeding Rs. 100 crore or more at any point of time during the preceding financial year; or

(iv)Outstanding deposits of Rs. 25 crore or more at any point of time during the preceding financial year; and

(c)Every private company having –

(i)Turnover of Rs.200 crore or more during the preceding financial year; or

(ii)Outstanding loans or borrowings from banks or public financial institutions exceeding Rs.100 crore or more at any point of time during the preceding financial year.

Accordingly, in the given case, answer is as under:

An internal auditor, 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. The internal auditor may or may not be an employee of the company.

So, if President (HR) and DGM (Finance) satisfying the above criteria, can be appointed as internal Auditor.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 3(b) (Syllabus 2017).

The Companies Act, 2013 has introduced the system of rotation of auditors under section 139(2) of the Act and rule 5 of the Companies (Audit and Auditors) Rules, 2014, which is applicable to :

•all listed companies;

•all unlisted public companies having paid up share capital of rupees 10 crore or more;

•all private limited companies having paid up share capital of rupees 50 crore or more;

•all companies having paid up share capital of below threshold limit mentioned in (a) and (b) above, but having public borrowings from financial institutions, banks or public deposits of rupees 50 crore or more;

The concept of rotation of auditors shall not apply to one-person companies and small companies.

All the companies mentioned above shall not appoint or re-appoint an individual as an auditor of the company for more than one term of 5 consecutive years. An individual auditor, who has completed his term of 5 consecutive years, shall not be eligible for re-appointment as auditor in the same company for 5 years from the date of completion.

In light of the above Supershine Detergents Private Ltd. is not a ‘small company’. Being a private company, it has borrowings from financial institutions worth Rs. 60 crore which is higher than Rs. 50 crore and thus is hit by the mandatory rotation provisions of auditors. Accordingly, S. Nagori & Associates who has acted as auditor for five years from FY 2019-20 to end on FY 2023-24 cannot be reappointed as statutory auditor in the company for FY 2024- 25 though audit committee is happy with auditor’s performance.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 1(d) (Syllabus 2022).

The appointment of auditor of Government Company or Government controlled (directly or indirectly) company shall be held in accordance with the provision of section 139(5) and (7) of the Companies Act, 2013.The First auditor shall be appointed by the Comptroller and Auditor General of India within 60 days from the date of incorporation and in case of failure to do so, the Board shall appoint within next 30 days and on failure to do so by the Board of Directors, it shall inform the members, who shall appoint the auditor within 60 days at an extra ordinary general meeting (EGM), who shall hold office till the conclusion of the first annual general meeting.

74% of shares of XYZ Ltd, is held by Central Government, thus XYZ Ltd., will be a Government Company. First auditor of XYZ Ltd is appointed on 16th May 2023, i.e., within 60 days from the date of incorporation i.e., 1st April 2023.

The appointment of first auditor of XYZ Ltd., is valid and within the time specified under the provisions of the Companies Act, 2023.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 2A(i) (Syllabus 2017).

Any vacancy arising in the office of auditor due to any reason except on account of expiry of his term is known as casual vacancy. As per section 139(8) of the Companies Act, 2013, Board of directors has power to fill casual vacancy in office of auditor within thirty (30) days.

In case casual vacancy is occurred due to resignation of auditor, such appointment shall be approved by the General Meeting convened within 3 months of the recommendation of the Board. Appointment of auditors to fill casual vacancy shall be made after taking into account the recommendation of audit committee, if any. The new auditor shall hold the office till the conclusion of the next annual general meeting. Written and signed consent and certificate shall be obtained from the auditor stating the appointment shall be in accordance with the conditions as may be prescribed under Rule 4 of the Companies (Audit and Auditors) Rules, 2014 and satisfies the criteria provided in section 141. Company shall inform the auditor concerned of his or its appointment.

Resigning auditor shall file Form ADT-3 with the company and the Registrar of Companies along with valid reasons within the 30 days of the date of resignation. The company shall file a notice of appointment (Form ADT-1) with the Registrar within fifteen days of the meeting in which the auditor is appointed.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 2A(i) (Syllabus 2017).

In terms of Section 139(7) of the Companies Act, 2013, in case of a Government Company or any other company owned or controlled, directly or indirectly, by the Central Government, or by any State Government, or Governments, or partly by the Central Government and partly by one or more State Governments, the first auditor shall be appointed by the Comptroller and Auditor General of India within 60 days from the date of registration of the company and in case the Comptroller and Auditor-General of India does not appoint such auditor within the said period, the Board of Directors shall appoint such auditor within the next 30 days; and in the case of failure to do so by the Board of Directors, it shall inform the members, who shall appoint the auditor within 60 days at an extraordinary general meeting (EGM), such auditor shall hold office till conclusion of the first Annual General Meeting of the company.

The above provisions shall be applicable to ESS Ltd., as it is a government company and it has appointed its first auditor on July 15, 2018 i.e., well within 60 days from the date of incorporation. Hence, it has duly complied with the applicable provisions of the Companies Act, 2013.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 3(d) (Old syllabus).

Section 139(2) of the Companies Act, 2013 read with Rule 5 of the Companies (Audit and Auditor) Rules, 2014 provides that except one person companies and small companies, no listed company or a company belonging to the following classes of companies, shall appoint or re-appoint-

(a)an individual as an auditor for more than one term of five consecutive years; and

(b)an audit firm as auditor for more than two terms of five consecutive years.

The following classes of companies excluding one person companies and small companies:

(a)all unlisted public companies having paid up share capital of rupees ten crore or more;

(b)all private limited companies having paid up share capital of rupees fifty crore or more;

(c)all companies having paid up share capital of below threshold limit mentioned in

(a)and (b) above, but having public borrowings from financial institutions, banks or public deposits of rupees fifty crores or more.

Considering Smithson & Co an individual auditor who has completed his five years term from FY 2014-15 to FY 2018-19

In the instant case, Spacekid Private Ltd has paid up share capital with the threshold of Rs.10 Crore, but the bank borrowings are beyond the threshold limit of Rs. 50 Crore and hence the provisions relating to rotation of auditors will apply to the Company.

Accordingly, Smithson & Co, who have been the statutory auditors of the Company for the last 5 years cannot be reappointed. The Company should go for a change of the auditors.

OR

Considering Smithson & Co an auditor firm who has completed his five years term from FY 2014-15 to FY 2018-19

An audit firm which has completed the two terms of five consecutive years shall not be eligible for re-appointment as auditor in the same company for five years from the completion of such term.

Accordingly, in this case, Smithson & Co, being an auditor firm having completed only single term of 5 yrs in the Company, is eligible for reappointment.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 2A(iii) (Old syllabus).

Section 139(2) of the Companies Act, 2013 provides that as on date of appointment of Auditors, no audit firm having a common partner or partners to the other audit firm whose tenure has expired in a company immediately preceding the financial year shall be appointed as auditor of the same company for a period of five years.

Here M Ltd is a listed entity and thus rotational provisions are applicable. B is a partner in ABC & associates whose tenure as statutory auditor in M Ltd has expired. He joined XY &Co. as partner 4 months after XY & Co. was appointed as statutory auditor of M Ltd.

It may be noted that there should not be a common partner in firms as on date of appointment. In the given case, B has joined XY &Co. after 4 months of its appointment as statutory auditor of M Ltd. Thus, XY &Co. can continue as statutory auditor of M Ltd for the remaining term after B joined them as Partner.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 5(d) (Syllabus 2017).

According to the provisions of section 139 of the Companies Act, 2013 read with Rule 5 of Companies (Audit and Auditors) Rules, 2014 the following companies are required to appoint and rotate auditors:

a.all listed companies;

b.all unlisted public companies having paid up share capital of rupees ten crore or more;

c.all private limited companies having paid up share capital of rupees fifty crore or more;

d.all companies having paid up share capital of below threshold limit mentioned in

(a)and (b) above, but having public borrowings from financial institutions, banks or public deposits of rupees fifty crores or more.

An individual auditor who has completed his term as auditor for more than one term of five consecutive years and an audit firm who has completed the term as auditor for more than two terms of five consecutive years shall not be re-appointed as an auditor of the company.

It is further provided that as on the date of appointment no audit firm having a common partner or partners to the other audit firm, whose tenure has expired in a company immediately preceding the financial year, shall be appointed as auditor of the same company for a period of five years

Accordingly in the present case the company is required to appoint and rotate the auditors on completion of the tenure. Thus Gayatri Ltd cannot appoint YE audit firm as auditor of the company.

a.In case the appointee company is a One Person Company, rotation of auditor does not apply and hence the appointing company can appoint YE audit firm as auditor.

b.In case the appointee company is a Small Company, rotation of auditor does not apply and hence the appointing company can appoint YE audit firm as auditor.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2018, Q. 3(a) (Syllabus 2017).

The Auditors conveyed their unwillingness to act as Auditors after they were reappointed by the company in the AGM held on 22.09.2025. Hence, the re-appointment is valid.

The communication of unwillingness to act as an auditor after a valid re-appointment made in the AGM amounts to resignation of auditor causing a casual vacancy. As per section 139(8) of the Companies Act, 2013, any casual vacancy in the office of an auditor shall in the case of a company, be filled by the Board of directors within thirty days. Where such casual vacancy is as a result of the resignation of an auditor, such appointment shall also be approved by the company at a general meeting convened within three months of the recommendation of the Board and such auditor shall hold the office till the conclusion of the next annual general meeting. Hence, the company should take the required steps to fill up the casual vacancy so caused.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 2(e) (Syllabus 2022).

As per section 140 of the Companies Act, 2013-The auditor appointed under section 139 of the Companies Act, 2013, may be removed from his office before the expiry of his term only by a special resolution of the company, after obtaining the prior approval of Central Government in that behalf in the manner prescribed in rule 7 of the Companies (Audit & Auditors) Rules, 2014.

As per rule 7, the auditor appointed under section 139 of the Act, may be removed from his office before the expiry of the term only by -

(i)Obtaining the prior approval of Central Government by filling an application in Form ADT-2 within 30 days of resolution passed by the Board.

(ii)The company shall hold the general meeting within sixty days of receipt of approval of the Central Government for passing the special resolution.

(iii)The auditor concerned shall be given a reasonable opportunity of being heard.

As Central Government approval was not obtained in this case, ordinary resolution was passed instead of special resolution and auditor was not provided an opportunity of being heard, the objection of the auditor is valid.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 2(e) (Syllabus 2022).

Given problem is based on removal of auditor by Tribunal in event of fraud u/s 140(5) of the Companies Act 2013.

As per the provisions of Section 140(5) of the Companies Act, 2013, the Tribunal may either

•Suo motu or

•on an application made to it by the Central Government or

•by any person concerned,

if it is satisfied that the auditor of a company has whether directly or indirectly acted in a fraudulent manner, or abetted or colluded in any fraud by, or in relation to, the company or its directors or officers , it may, by order, direct the company to change its auditors.

Section further states that if the application is made by the Central Government and the Tribunal is satisfied that any change of the auditor is required, it shall within 15 days of receipt of such application, make an order that he shall not function as an auditor and the Central Government may appoint another auditor in his place.

An auditor, whether individual or firm, against whom final order has been passed by the Tribunal under this section shall not be eligible to be appointed as an auditor of any company for a period of five years from the date of passing of the order and the auditor shall also be liable for action under section 447.

Based upon the above provision. we may conclude as follow: -

(i)This Section authorizes the Tribunal to pass order for directing the company to change the auditor. However, the Tribunal shall not directly remove the auditor. The application is tenable as it is made by the persons concerned.

(ii)Auditor pf Green Stone Limited so removed shall not be eligible for appointment as an auditor of any company for a period of five years from the date of passing of the order and the auditor shall also be liable for action under section 447.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 3(c) (Syllabus 2022).

Section 115 read with rule 23 of Companies (Management and Administration) Rules, 2014 deals with resolutions requiring special notice.

Where a special notice is so required of any resolution, notice of the intention to move such resolution shall be given to the company by such number of members holding not less than 1% of total voting power or holding shares on which the aggregate sum of not less than Rs.5 Lakhs has been paid-up on the date of notice.

The instances which require a special notice under the provisions of the Companies Act, 2013 are as follows:

(a)Under Section 140(4) of the Companies Act, 2013, resolution for appointing a person as auditor at the annual general meeting other than a retiring auditor or providing expressly that the retiring auditor shall not be re-appointed.

(b)Under sub-section (2) and (5) of section 169 to remove a director before the expiry of the period of his office and to appoint somebody in place of director so removed in the same meeting.

Accordingly, there is no such provision of special notice under the Companies Act, 2013, for removal of statutory auditor. However, the Articles of Association of company may provide for additional matters which may require special notice, in terms of Section 115 of the Companies Act, 2013.

Section 140(1) read with Rule 7 of the Companies (Audit and Auditors) Rules, 2014, clearly stipulates that the auditor appointed under section 139 of the Companies Act, 2013 may be removed from his office before the expiry of his term only by passing a special resolution of the company, after obtaining the previous approval of the Central Government by filling an application in form ADT-2 within 30 days of the resolution passed by the Board. Hence, Rajesh & Co. can be removed by following the prescribed procedures.

Further, as per Section 139(8) of the Companies Act, 2013, Ritaban & Co. can be appointed by the Board of Directors within 30 days to fill such casual vacancy.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 5(d) (Syllabus 2017).

The present case is a resignation of auditor post AGM held on 28th Sep 2018. Hence, this becomes a resignation by the Auditor and SAM & Co. shall file a statement in ADT-3 indicating the reasons and other facts with regard to their resignation, with the Company and the registrar.

Any casual vacancy in the office of an auditor shall in the case of a company, be filled by the Board of Directors within thirty days. Where such casual vacancy is as a result of the resignation of an auditor, such appointment shall also be approved by the company at a general meeting convened within three months of the recommendation of the Board and he shall hold the office till the conclusion of the next annual general meeting.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2018, Q. 5(c) (Old syllabus).

(i)As per section 141(3)(d)(iii) of the Companies Act, 2013 read with rule 10 of the Companies (Audit and Auditors) Rules, 2014, an auditor is disqualified to be appointed as an auditor if he or his relative or partner has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, or its subsidiary, or its holding or associate company or a subsidiary of such holding company, in excess of one lakh rupees.

In the given situation, Keshav will be disqualified to be appointed as an auditor of MNO Ltd as his partner (i.e. Naveen) had given a guarantee for Rs. 1.10 lakhs (i.e. more than the limit of Rs. 1 lakh), in connection with the indebtedness of any third person to the subsidiary of the company.

(ii)As per section 141(3)(d)(ii) of the Companies Act, 2013 read with rule 10 of The Companies (Audit and Auditors) Rules, 2014, an auditor is disqualified to be appointed as an auditor if he or his relative or partner is indebted to the company, or its subsidiary, or its holding or associate company or a subsidiary of such holding company, in excess of rupees 5 Lacs.

In this case, Aryaman will not be disqualified to be appointed as an auditor of DEF Ltd. As he is indebted to DEF Ltd. for Rs. 4,95,000 which is within the limit (i.e. less than Rs. 5 lacs)

(iii)In this case, since Manju, wife of Vaibhav, (Chartered Accountant) is the Purchase Manager (not a director or KMP) of RST Ltd.

Hence, Vaibhav will not be disqualified to be appointed as an auditor in the said Company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 4(b) (Syllabus 2022).

(i)Section 141(3) of the Companies Act, 2013 provides that a person shall not be eligible for appointment as an auditor of a company when he himself or his relative or partner is holding any security of or interest in the company or its subsidiary, or of its holding or associate company or a subsidiary of such holding company.

In this case Mr. X, a practicing Chartered Accountant holding shares in ABC Ltd cannot be appointed as Auditor of that company.

(ii)Section 141(3) of the Companies Act, 2013 read with Rule 10 of the Companies (Audit and Auditors) Rules, 2014 provides that a person shall not be eligible for appointment as an auditor of a company when he has business relationship with the company, or its subsidiary, or its holding or associate company or subsidiary of such holding company or associate company.

The term business relationship shall be construed as any transaction entered into for a commercial purpose except –

-commercial transactions which are in the nature of professional services permitted to be rendered by an auditor or audit firm under the Act and the Chartered Accountant Act, 1949 and the rules or the regulations made under those Act;

-commercial transactions which are in the ordinary course of business of the company at arm's length price – like sale of products or services to the auditors, as customer, in the ordinary course of business, by companies engaged in the business of telecommunications, airlines, hospitals, hotels and such other similar businesses.

Since the transaction is at the arm length price so Mr. A can be appointed as an auditor of XYZ Hotels Ltd.

(iii)As per section 141(3) of the Companies Act, 2013 provides that an officer or employee of the company is not eligible for appointment as an auditor of a company.

In this case Mr. X, is working as a General Manager Accounts with ABC Ltd. so he cannot be appointed as Auditor of that company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 3(c) (Syllabus 2017).

Section 141 (3) of the Companies Act, 2013 read with Rule 10 of the Companies (Audit and Auditors) Rules, 2014 prescribes the conditions where a person is disqualified to become a statutory auditor of a company.

(a)Bharat is disqualified pursuant to Section 141(3)(i) read with Section 144(b), being a person who, directly or indirectly, renders the services to the company as an Internal Auditor, being a service referred to in Section 144(b).

(b)Mohan is disqualified pursuant to Section 141(3)(d)(i) as he holds securities in the associate company of Girija Ltd.

(c)Dinesh is not disqualified as the limit of indebtedness for the auditor or his relative is exceeding Rs.5,00,000 as specified under Section 141(3)(d)(ii) read with Rule 10 of the Companies (Audit & Auditors) Rules, 2014 and in this case Dinesh's son owes only Rs. 80,000.

(d)Mukesh, though convicted by a court for an offence involving fraud, is not disqualified as a period of 10 years have elapsed. Accordingly, Mukesh is not disqualified under Section 141(3)(h) of the Companies Act, 2013.

(Assuming the appointment of Mukesh, statutory auditor has been done after the year 2015 i.e. after 10 years)

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 3A(ii) (Old syllabus).

The Companies (Auditor’s Report) Order, 2020 (CARO 2020) will be applicable to all the companies including foreign companies except banking company, insurance company, section 8 company, OPC [section 2(62)], small company [section 2(85)], and certain private limited companies.

The order states that every report of the auditor under Section 143 of Companies Act, 2013 must contain the matters stated in 21 clauses as specified under paragraphs 3 and accord reasons for unfavourable or qualified answer as stated in paragraph 4 of CARO 2020.

Analysis and Conclusion:

In the present case, although the auditor has given unfavourable/qualified remarks relating to physical verification of inventory under Paragraph 3, no reasons have been provided for such remarks. Hence, the auditor’s report is not compliant with the requirements of Paragraph 4 of CARO 2020.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 1(e) (Syllabus 2022).

Meaning of Fraud: According to Section 447 of Companies Act, 2013, fraud, in relation to the affairs of a company, inter alia, includes any act, omission, concealment of any fact or abuse of position committed by any person with intent to deceive, to gain undue advantage from of injure the interests of the company or its stakeholders or its creditors or any other person whether or not there is any wrongful gain or wrongful loss.

Following is the course of action to be taken by auditor:

•According to Section 143(12) read with Rule 13 of Companies (Audit and Auditors) Rules, 2014, if the statutory auditor has reason to believe that an offence of fraud which involves or is expected to involve an amount of rupees One crore or more, is being or has been committed against the company by its officers or its employees, the auditor shall report the matter to the Central Government.

•The auditor shall report the matter to the audit committee immediately but not later than two days of his knowledge of the fraud seeking the reply from the Board of Directors or the audit committee seeking their reply within 45 days.

•On receipt of such reply or observations, the auditor shall forward his report and the reply or observations of the Board or the Audit Committee along with his comments (on such reply or observations of the Board or the Audit Committee) to the Central Government within fifteen days from the date of receipt of such reply or observations.

•In case the auditor fails to get any reply or observations from the Board or the Audit Committee within 45 days, he shall forward his report to the Central Government along with a note containing the details of his report that was earlier forwarded to the Board or the Audit Committee for which he has not received any reply or observations.

•The report of auditor shall be in Form ADT-4 of the Companies (Audit and Auditors) Rules, 2014. In the instant case, as the company is a listed company, which is mandated under section 177 of the Companies Act to constitute an audit committee and the amount of fraud is about rupees 80 crore, the auditor should report the matter to the Central Government in time, whether or not a reply is received from the company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 3(b) (Syllabus 2017).

Section 144 of the Companies Act, 2013 provides that an auditor appointed under this Act shall provide to the company only such other services as are approved by the Board of directors or the audit committee, as the case may be, but which shall not include specified services, whether those services are rendered directly or indirectly to the company or its holding company or subsidiary company. Specified services include investment advisory services.

Thus, applying the provision into the given case, BCD Co. LLP, Chartered Accountants, shall not accept the said assignment, if offered by AEASPL, holding company of BTPL. The objection of secretarial advisor is correct.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 1(d) (Syllabus 2022).

Section 144 of the Companies Act, 2013 provides that an auditor appointed under this Act shall provide to the company only such other services as are approved by the Board of Directors or the Audit Committee, as the case may be, but which shall not include any of the following services (whether such services are rendered directly or indirectly to the company or its holding company or subsidiary company), namely:—

(a)Accounting and book keeping services;

(b)Internal audit;

(c)Design and implementation of any financial information system;

(d)Actuarial services;

(e)Investment advisory services;

(f)Investment banking services;

(g)Rendering of outsourced financial services;

(h)Management services; and

(i)Any other kind of services as prescribed.

Thus, in view of the specific prohibition under the above referred provisions, a statutory auditor of public or private company cannot render actuarial services to the company or any of its holding or subsidiary company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 1(d) (Old syllabus).

Section 144 of the Companies Act, 2013 provides that an auditor shall provide to the company only such other services as are approved by the Board of Directors/ the audit committee, but which shall not include any of the following services (whether such services are rendered directly or indirectly to the company or its holding company or subsidiary company, namely:-

(a)accounting and book keeping services;

(b)internal audit;

(c)design and implementation of any financial information system;

(d)actuarial services;

(e)investment advisory services;

(f)investment banking services;

(g)rendering of outsourced financial services;

(h)management services; and

(i)any other kind of services as may be prescribed.

Therefore based on the above mentioned provisions advice to Vijay will be as under:

(i)Vijay cannot conduct internal audit of XYZ Ltd or carryout actuarial services to XYZ Ltd.

(ii)Vijay cannot provide management services or implementation of financial system to ABC Ltd as such services to the holding company is also not allowed..

(iii)Providing (i) and (ii) services above to PQR Ltd the subsidiary company of XYZ Ltd is also not allowed.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 3(b) (Syllabus 2017).

i)Section 148(3) of the Companies Act, 2013 read with Rule 14 of the Companies (Audit & Auditors) Rules, 2014 prescribes that the Board of directors shall appoint, an individual, who is a cost accountant, or a firm of cost accountants in practice, as cost auditor on the recommendations of the Audit committee (if the Company has such a Committee, as the case may be) which shall also recommend remuneration for such cost auditor.

ii)Every cost auditor, who conducts an audit of the cost records of a company, shall submit the cost audit report along with his or its reservations or qualifications or observations or suggestions, if any, in Form CRA-3 [Rule 6(4) of the Companies (Cost Records & Audit) Rules, 2014].

iii)As per rule 6(6) of the Companies (Cost Records & Audit) Rules, 2014, every eligible company covered under these rules shall, within a period of 30 days from the date of receipt of a copy of the cost audit report, furnish the Central Government with such report along with full information and explanation on every reservation or qualification contained therein, in Form CRA-4 in Extensible Business Reporting Language format along with fees specified in the Companies (Registration Offices and Fees) Rules, 2014.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 4A(iii) (Syllabus 2022).

Rule 4 of Companies (Cost Records and Audit) Rules, 2014 provides for applicability of cost audit. Accordingly,

1)Every company specified in item (A) of rule 3 of Companies (Cost Records and Audit) Rules, 2014 i.e. regulated sectors shall get its cost records audited in accordance with these rules if the overall annual turnover of the company from all its products and services during the immediately preceding financial year is rupees fifty crore or more and the aggregate turnover of the individual product or products or services for which cost records are required to be made under rule 3 is rupees twenty five crore or more.

2)Every company specified in item (B) of rule 3 of Companies (Cost Records and Audit) Rules, 2014 i.e. non-regulated sectors shall get its cost records audited in accordance with these rules if the overall annual turnover of the company from all its products and services during the immediately preceding financial year is rupees one hundred crore or more and the aggregate turnover of the individual product or products or service or services for which cost records are required to be made under rule 3 is rupees thirty five crore or more.

3)The requirement of cost audit under these rules shall not apply to a company which is covered in rule 3, and

i)whose revenue from exports in foreign exchange exceeds seventy five percent of its total revenue; or

ii)which is operating from a SEZ.

iii)which is engaged in generation of electricity for captive consumption through captive generating plant.

In the given case, the turnover of Chirag Ltd. is Rs. 30 Crore. The company is advised that if the company operates in regulated sector, and the aggregate turnover of the individual product(s) / service(s) is Rs. 25 crores or more, then, cost audit will be applicable.

If it operates in non-regulated sector, cost audit is not applicable, as the turnover of the company does not meet the criteria prescribed in the Rules.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 2A(iii) (Syllabus 2017).

According to Section 204(1) of Companies Act, 2013 (the Act), read with Rule 9 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the following companies are required to annex with its Board’s Report under section 134 of the Act, a Secretarial Audit Report given by a company secretary in practice in Form MR-3:

a)Every listed company; or

b)Every public company with a paid-up equity share capital of Rs. 50 crore or more

c)Every public company with a turnover of Rs. 250 crore or more or

d)Every company having outstanding loan from banks or public financial institutions of Rs.100 crore or more.

According to Regulation 24A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR), every listed entity and its material unlisted subsidiary(ies) incorporated in India shall undertake secretarial audit and shall annex a secretarial audit report given by a company secretary in practice in Form MR-3 along with the annual report of the listed entity as per Schedule V of LODR.

According to Regulation 24A of LODR, every listed company shall also submit secretarial compliance report to the stock exchanges within 60 days from end of financial year.

The annual secretarial compliance report, apart from the coverage on compliance of laws applicable to the listed company, also requires the practicing company secretary to report on compliance of all applicable SEBI regulations, circulars and guidelines to the stock exchanges.

Thus, the given statement that every Company is mandated to obtain annual secretarial audit report and annual secretarial compliance report is not correct.

The statutory auditor of the company is a practicing-chartered accountant. Under Section 143 of the Companies Act, 2013, the statutory auditor is required to audit the financial accounts of the company and give his opinion whether the financial statements give a true and fair view of the state of affairs of the company.

The statutory auditor has no role in certifying the annual secretarial audit report or annual secretarial compliance report. Thus, the second part of the statement is also incorrect.

Annual secretarial audit report is different from annual secretarial compliance report. Both Annual secretarial audit report and Annual secretarial compliance reports are given by a practicing company secretary and not by the statutory auditor.

Thus, the second part of the statement is also incorrect.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 1(c) (Syllabus 2017).

As per section 204(1) of the Companies Act, 2013, every listed company and a company belonging to other class of companies as may be prescribed shall annex with its Board’s report, a secretarial audit report, given by a company secretary in practice, in such form as may be prescribed. As per rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, for the purposes of section 204(1), the other class of companies shall be as under-

a.Every public company having a paid-up share capital of fifty crore rupees or more; or

b.Every public company having a turnover of two hundred fifty crore rupees or more; or

c.Every company having outstanding loans or borrowings from banks or public financial institutions of one hundred crore rupees or more.

Further, as per Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 [SEBI (LODR) Regulations], every listed entity and its material unlisted subsidiaries incorporated in India shall undertake secretarial audit and shall annex a Secretarial Audit Report given by a Company Secretary in Practice, in such form as specified, with the annual report of the listed entity. Hence, secretarial audit for AB Pvt. Ltd, is compulsory and not voluntary.

Every listed entity shall submit a Secretarial Compliance Report in such form as specified, to stock exchanges, within sixty days from end of each financial year.

As per explanation to Regulation 24(1) of the SEBI (LODR) Regulation, 2015 “Material Subsidiary” shall mean a subsidiary, whose income or net worth exceeds twenty percent of the consolidated income or net worth respectively, of the listed company and its subsidiaries in the immediately preceding accounting year.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 2(b) (Syllabus 2022).

Considering the increasing importance of Corporate Governance, Section 204 of the Companies Act, 2013 mandates every listed company and such other class of prescribed companies to annex a Secretarial Audit Report, given by a Company Secretary in practice in Form MR-3 with its Board's report.

As per rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the prescribed class of companies is as under:

(a)every public company having a paid-up share capital of Rs.50 Crore or more; or

(b)every public company having a turnover of Rs.250 crore or more; or

(c)every company having outstanding loans or borrowings from banks or public financial institutions of Rs.100 crore or more.

Secretarial Audit is also applicable to a private company which is a subsidiary of a public company, and which falls under the prescribed class of companies as indicated above.

In light of the above provisions, applicability is given in the table below:

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 3(c) (Syllabus 2017).

As per rule 3 of the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2015, following class of companies shall file their financial statements in XBRL:

i)all companies listed with any Stock Exchange(s) in India and their Indian subsidiaries; or

ii)all companies having paid up capital of rupees five crore or above;

iii)all companies having turnover of rupees one hundred crore or above; or

iv)all Companies which are required to prepare their financial statement in accordance with companies (Indian Accounting standards) Rules, 2015.

Provided that the companies in banking, insurance, non-banking financial and housing finance companies need not file financial statements under this rule.

Hence, in the present case, conclusion is as under:

Long Ltd. – Required, as it is a listed company. Here turnover, paid up capital are immaterial.

Wide Private Ltd. – Not required as limits for paid-up capital and turnover not crossed. Here amount of borrowing is not relevant. However, if it is subject to clause (iv) above it shall file the statements using the Taxonomy provided in Annexure-IIA of the Companies (Filing of Documents and Forms in XBRL) Rules, 2015.

Sharp Ltd. – Not required as XBRL provisions are not applicable to insurance companies. Turnover and paid-up capital figures are irrelevant.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 4(b) (Syllabus 2022).

In terms of Rule 3 of Companies (Filing of Documents & Forms in XBRL) Rules, 2015 the Government has mandated certain classes of companies to file financial statements in XBRL mode using XBRL taxonomies. The following classes of companies have to file financial statements in XBRL form:

(i)all companies listed with any Stock exchange(s) in India and their Indian subsidiaries; or

(ii)all companies having a paid-up capital of ₹5 crore and above; or

(iii)all companies having a turnover more than ₹100 crores and above; or

(iv)all companies which are required to prepare their financial statements in accordance with Companies (Indian Accounting Standards) Rules, 2015

However, banking companies, insurance companies, housing finance and non-banking financial companies have been exempted from XBRL filing.

The company is not required to file its financial statements for the year ended 31st March, 2024 through XBRL mode as it is a housing finance company and is exempted from application of the provisions. The Junior Officer (Accounts) has to be advised accordingly.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 2A(i) (Syllabus 2017).

As per Rule 3 of the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2015 following class of companies shall file their financial statements in XBRL:

(i)all companies listed with any Stock Exchange(s) in India and their Indian subsidiaries; or

(ii)all companies having paid up capital of rupees five crore or above;

(iii)all companies having turnover of rupees one hundred crore or above; or

(iv)all Companies which are required to prepare their financial statement in accordance with companies (Indian Accounting standards) Rules, 2015.

Provided that the companies in banking, insurance, non-banking financial and housing finance companies need not file financial statements under this rule. Hence, in the present case, conclusion is as under:

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 3A(ii) (Old syllabus).

Rule 3 of the Companies (filling of Documents and Forms in Extensive Business Reporting Language) Rules 2018 mandates the following select class of companies mentioned below to file financial statements in XBRL (eXtensible Business Reporting Language) mode and by using the XBRL taxonomy:

(i)all companies listed with any Stock Exchange(s) in India and their Indian subsidiaries; or

(ii)all companies having paid-up capital of Rupees five crore and above; or

(iii)all companies having turnover of Rupees one hundred crore and above; or

(iv)all companies who were required to file their financial statements for FY 2010- 11, using XBRL mode.

However, the companies in banking, insurance, power sector, non-banking financial companies and housing finance companies are exempted from XBRL filing till further orders.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2018, Q. 2(e) (Syllabus 2017).