9
CHAPTER
ACCOUNTS, AUDIT AND AUDITORS
SHORT NOTE ON TRUE AND FAIR VIEW
Que. 1: Write a Short Note on: True and Fair View. (December 2011) (4 Marks) Or
Every financial statement of the company must give true and fair view of the state of affairs of the company at the end of the financial year. (June 2019) (5 Marks)
Ans.:
True and Fair view in respect of financial statement means
SHORT NOTE ON APPOINTMENT OF COST AUDITOR
Que. 2: Write a Short Note on: Appointment of Cost Auditor. (June 2012) (4 Marks)
Ans.: Appointment of Cost Auditor [Section 148(3)]:
Further Rule 14 of Companies(Audit & Auditors), Rules, 2014 provides that:
SHORT NOTE ON INTANGIBLE ASSETS
Que. 3: Write a Short Note on: Intangible Assets (June 2013) (4 Marks)
Ans.:
SHORT NOTE ON APPROVAL AND SIGNING OF BALANCE SHEET & PROFIT AND LOSS ACCOUNT
Que. 4: Write a Short Note on: Approval and Signing of the balance sheet and profit and loss account. (December 2013) (4 Marks) Or
Financial Statement shall be signed only by the Chairperson of the company. Explain (June 2015) (4 Marks) Or
Ritesh was appointed as a Director, Finance of a listed company. During his meeting with the statutory auditor, he represented that since Chief Financial Officer (CFO) who is a Chartered Accountant has already finalized the financial statements, he as well as the Board of directors doesn’t have any responsibilities insofar as preparation of financial statements are concerned. (December 2022) (5 Marks)
Ans.:
Approval and signing of financial statement [Section 134(1)]:
SHORT NOTE ON QUALIFICATION AND DISQUALIFICATION OF AUDITORS
Que. 5: Write a short note on: Qualification and disqualification of auditors. (June 2014) (4 Marks)
Ans.:
Qualifications:
Disqualification:
Section 141(3) of the Companies Act, 2013, read with Rule 10 prescribed the following persons shall not be eligible for appointment as an auditor of a company, namely:
POWER OF DIRECTORS TO APPROVE THE FINANCIAL STATEMENT
Que. 6: The power of directors to approve the financial statement can be delegated to a committee of director or some of the directors. Comment. (June 2010) (4 Marks)
Ans.:
Approval and signing of financial statement [Section 134(1)]
Thus, to approve the same the financial statement cannot be delegated to a committee of directors or some of the Directors.
Que. 7: It is not obligatory for every company to preserve its books of account. Comment. (June 2012) (5 Marks)
9.6
Ans.: Preservation of Books of Account [Section 128(5)]:
Regulation 9 of the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 provides following for preservation of documents:
BOOKS OF ACCOUNT
Que. 8: Where a company has a branch office, whether in India or abroad, the original books of account, records, etc of the branch office will have to be maintained in the registered office of the company.
(June 2013) (5 Marks)
Ans.:
As per Section 128(1) of the Companies Act, 2013
As per Rule 4(1) of the Rules,
Que. 9: A director has absolute right of inspection of books of account. Comment.
(December 2013) (4 Marks)
Ans.:
Inspection of books of account [Section 128(3)]: -
Que. 10: Books of account have to be kept only at the registered office of the company. As a corporate consultant give your comments in this regard (June 2021) (3 Marks)
Ans.: within seven days of such decision
e-form AOC 5
NOTES ON ACCOUNTS
Que. 11: Mention the importance of ‘notes on accounts’. Will it convey meaning to stakeholders? (December 2014) (4 Marks)
Ans.:
“Notes on Account”
SECRETARIAL AUDIT
Que. 12: Explain the provisions of Companies Act, 2013 relating to ‘secretarial audit’. State whether ‘secretarial audit’ is mandatory for all companies.
(June 2015) (4 Marks) Or
Explain with reference to the provisions of Companies Act, 2013, the meaning and importance of ‘secretarial audit’. Which companies are required to get the ‘secretarial audit’ conducted?
(December 2015) (4 Marks) Or
Who will appoint Secretarial Auditor of the Company: Board of directors or shareholders? What is the duty of Board of Directors towards secretarial auditor and audit report?
Ans.:
As per Section 204 of the Companies Act, 2013
(June 2018) (4 Marks)
As per Rule 8 of the Companies (Meeting of Board & its Powers) Rules, 2014,
As per Rule 9 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014:
For the purposes of Section 204(1) of the Companies Act, 2013, the other class of companies shall be as under:
Explanation
Note: Inserted by Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2020 Dated 03rd January, 2020 Amendment effective from on or after 1st April, 2020.
Secretarial Audit Report Form MR-3.
Que. 13: Chief Financial Officer (CFO) of a conglomerate is of the view that secretarial audit is mandatory for all the companies. He has approached you to determine whether secretarial audit is applicable in case of the following companies :
INTERNAL AUDIT
Que. 14: Answer the following by explaining the provisions of the Companies Act, 2013 relating to internal audit:
(i) Whether a private company is mandatory required to appoint an internal auditor? Who may be appointed as internal auditor?
(ii) Who may be appointed as Internal Auditor? Whether practicing company secretary (PCS) can be appointed as an internal auditor?
(June 2015) (4 Marks)
9.10
Ans.:
As per Rule 13 of the Companies (Accounts) Rules, 2014, makes following provisions relating to internal audit:
(
a) Every Listed Company.
(
b) Every unlisted public company having:
(
c) Every Private Company having—
Keeping in view of the above provisions:
ii As per Section 138 of the Companies Act, 2013:
9.11
Que. 15: Advise whether the internal auditor is required to be appointed in the following scenarios :
Can the following persons be appointed as internal auditor ?
(i) President (HR)
(ii) DGM (Finance).
(June 2021) (5 Marks)
Ans.: -
Que. 16: Perfect Pvt. Ltd. wishes to appoint its Secretary, Satish, as an internal auditor. Referring to the provisions of Companies Act, 2013 . Advice the Company.
Ans.:
(June 2018) (4 Marks)
Thus, Perfect Pvt. Ltd. can appoint Secretary, Mr. Satish as an internal auditor of the Company.
Que. 17: Ranveer, Chief Financial Officer (CFO) of the company has made the following observations with respect to the appointment of an internal auditor.
Particulars
Existing employee of the company who is a Chartered Accountant having experience of doing internal audit in past
Association of Chartered Accountants, Azad Nagar specialized in internal audits
Observations made by Ranveer
Cannot be appointed
9.12
B Pvt. Ltd. (a company owned and managed by Chartered Accountants engaged in the business of providing internal audit services)
Can be appointed
Examine, whether the observations are in accordance with the provisions of the Companies Act, 2013 ? (December 2022) (3 Marks)
Ans.:
SECRETARIAL AUDIT v. INTERNAL AUDIT
Que. 18: Distinguish between: ‘Internal Audit’ and ‘Secretarial Audit’. (June 2017) (4 Marks)
Ans.:
Points
Meaning
Who can be appointed?
Employee can be appointed or not?
Form
AUDIT COMMITTEE
Internal Auditor may or may not be an employee of the Company.
Form MR-3.
Que. 19: Explain the provisions of Companies Act, 2013 relating to constitution of an audit committee. What role does the audit committee play in the management of a company? (June 2015) (4 Marks)
With the scenarios described below, examine whether any of the following companies is required to constitute Audit Committee as per provisions of the Companies Act, 2013 ?
Name
Constitution of Audit Committee [Section 177(1)]:
As per Rule 6 of the Companies (Meetings of Board & Its Powers) Rules, 2014
Composition of Audit Committee [Section 177(2)]:
Role of an Audit Committee:
9.14
In light of provisions of Section 177 of Companies Act, 2013 read with Rule 6 of the Companies (Meetings of Board and its Powers) Rules, 2014,
Que. 20: RPK Ltd. is an unlisted Company having INR 9 crore as paid-up Capital as INR 52 crore as long term loan. The directors of the company would like to know from you the answers for the following questions :
(1) Would the company be liable to constitute an audit committee?
(2) If the company is listed after a fresh issue of shares to the tune of INR 50 crore, in such a situation, would the company be liable to constitute Audit Committee?
(3) What is the quorum for meetings number of meetings to be held in a year by the audit Committee? (December 2019) (1 + 1+ 2= 4 Marks)
Ans.:
Section 177(1) of the Companies Act, 2013 read with rule 6 of the Companies (Meetings of the Board and its Powers) Rules, 2014
Number of Meetings and Quorum :
In reference to above mentioned provisions of Section 177 of the Companies Act, 2013:
(Note: For answer of (iii) & (iv) above, it is assumed that RPK Limited is Listed Entity)
Que. 21: Approval of the Audit Committee to a related party transaction can be granted by passing a circular resolution. Discuss. (June 2021) (5 Marks)
Ans.: -
Thus, the approval of Audit Committee to a related party transaction can be granted by passing omnibus approval.