Okay, I will analyze the provided policy text and generate the report as requested, adhering strictly to the information contained within the document and focusing on the amendment aspects.
**Report on the Companies Audit and Auditors Amendment Rules, 2021**
**1. Executive Summary:**
This report analyzes the Companies Audit and Auditors Amendment Rules, 2021, which amends the Companies Audit and Auditors Rules, 2014. The core purpose of these amendments is to introduce additional reporting requirements for auditors regarding the company's handling of funds, compliance with dividend declaration regulations, and the use of accounting software with audit trail capabilities. The key findings indicate increased scrutiny on fund flows, dividend compliance and enhanced accountability regarding accounting software usage.
**2. Introduction:**
The purpose of this report is to provide a comprehensive overview of the Companies Audit and Auditors Amendment Rules, 2021, based solely on the provided policy text. This report aims to inform the Affected Industry regarding the changes and their potential implications.
**3. Policy Overview:**
* **Original Policy:** The Companies Audit and Auditors Rules, 2014.
* **Core Objectives (inferred from the amendment text):** The primary objective of this amendment is to enhance the audit process and improve transparency and accountability in corporate financial practices, specifically relating to fund management, dividend declarations, and the use of accounting software.
**4. Background and Rationale:**
The amendment likely aims to address concerns regarding potential misuse of funds, non-compliance with dividend regulations, and manipulation of accounting records. The introduction of specific audit requirements related to these areas suggests a perceived need for greater oversight and assurance in these aspects of corporate governance. The lack of clarity in the original rules regarding funds, dividends and audit software may have led to the introduction of the amendment.
**5. Key Provisions / Changes:**
This amendment focuses specifically on changes to *rule 11* of the Companies Audit and Auditors Rules, 2014.
* **Omission:** Clause (d) of rule 11 has been omitted. (The specific content of clause (d) cannot be determined from the provided text).
* **Insertion of New Clauses:** The following new clauses (e, f, and g) have been inserted after the omitted clause (d):
* **Clause (e):** This clause introduces a requirement for auditors to obtain representations from management regarding the advancement, loaning, or investment of funds (borrowed funds, share premium, or other sources) to or in other persons or entities (including foreign entities/Intermediaries) with the understanding that these Intermediaries will then lend or invest in Ultimate Beneficiaries or provide guarantees on their behalf. The auditor must also obtain management representations regarding funds received by the company from Funding Parties under a similar understanding of indirect lending/investment in Ultimate Beneficiaries. Furthermore, the auditor must perform procedures to assess the truthfulness of these management representations.
* **Clause (f):** This clause mandates auditors to verify if the dividend declared or paid during the year complies with Section 123 of the Companies Act, 2013.
* **Clause (g):** This clause mandates auditors to verify that the accounting software used by the company has an audit trail/edit log feature, that the feature was operational throughout the year for all transactions, that the audit trail was not tampered with, and that it has been preserved according to statutory requirements.
* **Effect of Changes:**
* Clause (e) introduces more detailed scrutiny on how a company is using or receiving funds and any arrangement of funds with any intermediaries.
* Clause (f) ensures that auditors explicitly check that dividend declarations are compliant with the Companies Act, providing an extra layer of assurance.
* Clause (g) aims to improve the reliability and integrity of financial records by ensuring the use and proper maintenance of audit trails in accounting software.
**6. Target Audience and Stakeholders:**
The primary target audience includes:
* **Companies:** They are subject to the new audit requirements related to fund management, dividend compliance, and accounting software.
* **Auditors:** They have new responsibilities and procedures to perform during audits.
* **Management:** They are required to provide representations regarding fund management and ensure compliance with the new regulations.
Other stakeholders indirectly affected include shareholders, investors, and regulatory bodies.
**7. Implementation Aspects (Inferred):**
* **Responsible Agency/Bodies:** The Ministry of Corporate Affairs (MCA) is the responsible agency, as indicated by the notification.
* **Timelines:** The amendment comes into effect on April 1, 2021.
* **Procedures:** Auditors need to incorporate the new clauses (e, f, and g) into their audit procedures and reporting. Companies need to ensure they have appropriate accounting software with functioning and preserved audit trails.
**8. Expected Outcomes / Impact of Changes:**
The expected outcomes of these changes are:
* Increased transparency in fund management and a reduction in the potential for misuse of funds through intermediaries.
* Improved compliance with dividend declaration regulations.
* Greater accountability and reliability of financial records due to the mandatory audit trail feature in accounting software.
* More robust and comprehensive audits.
**9. Conclusion:**
The Companies Audit and Auditors Amendment Rules, 2021, represent a significant step towards enhancing corporate governance and financial transparency. By introducing specific audit requirements related to fund management, dividend compliance, and accounting software audit trails, these amendments aim to improve the reliability of financial reporting and reduce the potential for financial irregularities. These changes will impact companies, auditors, and management and should result in more robust and transparent financial practices.
Key Entities Referenced
Companies Act, 2013: An act of the parliament of India that regulates incorporation, operation and winding up of a company.
Companies Audit and Auditors Rules, 2014: Rules pertaining to the audit and auditors of companies, as per the Companies Act, 2013.
Companies Audit and Auditors Amendment Rules, 2021: Amendment rules to the Companies Audit and Auditors Rules, 2014.
Ministry of Corporate Affairs: The ministry responsible for administration of the Companies Act 2013 and other related acts, rules and regulations.
New Delhi: The location of the notification, presumably the headquarters of the Ministry of Corporate Affairs, located in Delhi, India.
K.V.R. Murty: The Joint Secretary who signed the notification.
रजिस्ट्री स.ं डी.एल.- 33004/99 REGD. No. D. L.-33004/99
सी.जी.-डी.एल.-अ.-24032021-226082
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CG-DL-E-24032021-226082
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असाधारण
EXTRAORDINARY
भाग II—खण् ड 3—उप-खण्ड (i)
PART II—Section 3—Sub-section (i)
प्राजधकार स ेप्रकाजित
PUBLISHED BY AUTHORITY
स.ं 157] नई दिल्ली, बधु वार, माच य24, 2021/व्चत्रै 3, 1943
No. 157] NEW DELHI, WEDNESDAY, MARCH 24, 2021/CHAITRA 3, 1943
कारपोरेट कार् यमत्रं ालर्
अजधसचू ना
नई दिल् ली, 24 माच,य 2021
सा.का.जन. 206(अ).—केंद्रीर् सरकार, कंपनी अजधजनर्म, 2013 (2013 का 18) की धारा 469 की उपधारा
(1) और उपधारा (2) के साथ पठित धारा 139, धारा 143, धारा 147 और धारा 148 द्वारा प्रित् त िजतत र्क का प्रर्ोग
करते हुए कंपनी (लेखा परीक्षा और लेखा परीक्षक) जनर्म, 2014 में जनम्न जलजखत और संिोधन करने के जलए जनम्नजलजखत
जनर्म बनाती ह,ै अथायत ् :-
1. संजक्षप् त नाम और प्रारम् भ – इन जनर्मक का संजक्षप्त नाम कंपनी (लेखा परीक्षा और लेखा परीक्षक) संिोधन जनर्म,
2021 ह।ै
(2) र् ेजनर्म 1 अप्रैल, 2021 से प्रवृत्त हकगे।
2. कंपनी (लेखा परीक्षा और लेखा परीक्षक) जनर्म, 2014 म,ें जनर्म 11 म ें–
(1) खडं (घ) को लोप दकर्ा िाएगा।
(2) खडं (घ) के बाि, जनम्न जलजखत खंडक को अंत:स्ट्थ ाजपत दकर्ा िाएगा, अथायत ्:-
“(ड़) (i) दक तर्ा प्रबंधन न े बही खातक म ें दिए गए ठटप् पणक के अलावा अपनी सववोतत्तम िानकारी और जव् वास के ाधार
पर र्ह कहा ह ै दक कंपनी द्वारा जविेिी कंपजनर्क (“जबचौजलर्क”) सजहत कंपनी द्वारा अथवा दकसी अन् र् ् र्जतत /व्् र्जतत र्क
अथवा कंपनी/व्कंपजनर्क को र्ह समझते हुए कोई भी राजि अजिम नहीं िी गई ह ै अथवा ऋण नहीं दिर्ा गर्ा ह ै अथवा
जवजनधान नहीं दकर्ा गर्ा ह ै ऋण ली गई राजि र्ा िेर्र जनजधर्ां अन्र् प्रकार के स्रोतक र्ा जनजधर्क में से दक उसे जलजखत
1766 GI/2021 (1)2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
अथवा अन् र्था ूप म ें अजभजलजखत दकर्ा िाएगा और र्ह दक जबचौजलर्ा चाह े प्रत् र्क्षत: अथवा अप्रत्र् क्षत: कंपनी (‘अंजतम
जहताजधकारी’) की ओर से अथवा दकसी और प्रकार स े जचजन् हत अन् र् ् र्जतत र्क अथवा कंपजनर्क को ऋण िगे ा अथवा जनविे
करेगा अथवा नहीं िगे ा अथवा वह कोई गारंटी प्रजतभूजत उपलब् ध कराएगा अथवा अंजतम जहताजधकारी की ओर से ससा
करना चाहगे ा;
(ii) दक तर्ा प्रबंधन ने खातक में दिए गए ठटप् पणक के अलावा अपनी सववोतत्तम िानकारी और जव् वास के ाधार पर र्ह
कहा ह ै दक कंपनी द्वारा इस ािर् के साथ जविेिी इकाइर्क (‘जवत् त पोकक पक्षकारक’) सजहत दकसी ् र्जतत /व्् र्जतत र्क द्वारा
कोई जनजध िी ह ै दक उसे जलजखत अथवा अन् र्था ूप म ें अजभजलजखत दकर्ा िाएगा और र्ह दक कंपनी प्रत् र्क्षत: अथवा
अप्रत्र् क्षत: इस प्रकार से जचजन्ह त अन् र् ् र्जतत र्क अथवा इकाइर्क को ऋण नहीं िगे ी अथवा वहां जनवेि नहीं करेगी चाह े
वह जवत् त पोकण पक्ष (अंजतम जहताजधकारी) द्वारा हो अथवा उसकी ओर स े हो अथवा उसके द्वारा दकसी गारंटी प्रजतभूजत का
उपबंध दकर्ा गर्ा हो अथवा उसे अंजतम जहताजधकारी की ओर से दकर्ा हो; और
(iii) ससी लेखा परीक्षा प्रदिर्ाओं के ाधार पर िजृ ट गत रखते हुए दक लेखा परीक्षक ने पठरजस्ट्थजतर्क पर तकयसगं त और
उजचत माना ह ै उनकी िानकारी में ससी कोई बात नहीं ाई ह ै दक जिससे उन् हें र्ह जव् वास हो दक उप-खंड (1) और उप-
खंड (2) के अनुसार दकए गए प्रजतवेिनक में वस्ट् तुजस्ट् थजत से संबंजधत कोई गलत-वतत ् र् ह।ै
(च) तर्ा कंपनी द्वारा वकय के िौरान घोजकत अिं िान अथवा प्रित् त राजि कंपनी अजधजनर्म, 2013 की धारा 123 के
अनुपालन म ेंह।ै
(छ) तर् ा कंपनी ने अपने बही खातक के रखरखाव के जलए ससे लेखा साफ्टवेर्र का उपर्ोग दकर्ा ह ैजिसमें लेखापरीक्षा
रेल (एजडट लॉग) सुजवधा को अजभजलखत करन े की जविेकता ह ै और र्ह दक उसे साफ्वेर्र म ें अजभजलजखत सभी संव्यवहारक
के जलए परू े वक य के िौरान प्रचाजलत दकर्ा गर्ा और र्ह दक इससे लेखा परीक्षा प्रदिर्ा प्रजतकूल ूप स े प्रभाजवत नहीं हुई
और र्ह दक अजभलेख अनरु क्षण के जलए कानूनी अपेक्षाओं के अनुसार कंपनी द्वारा लेखा परीक्षा को पठररजक्षत दकर्ा गर्ा ह।ै
[फा.सं. 1/व्33/व्2013-सीएल-V (पाटय)]
के.वी.ार मूर्त,य संर्ुत त सजचव
ठटप्प ण: मूल जनर्म तारीख 31 माच,य 2014 की संख् र्ा सा.का.जन. 246(अ) के द्वारा भारत के रािपत्र असाधारण
भाग-II, खंड-3, उपखंड(I) में प्रकाजित हुए थ ेतथा उसमें जनम् नानुसार संिोधन दकए गए थ-े
1. सा.का.जन. 722(अ) तारीख 14 अत तूबर, 2014;
2. सा.का.जन. 972(अ) तारीख 14 दिसम् बर, 2015;
3. सा.का.जन. 307(अ) तारीख 30 माचय, 2017;
4. सा.का.जन. 621(अ) तारीख 22 िून, 2017;
5. सा.का.जन. 174(अ) तारीख 16 फरवरी, 2018
6. सा.का.जन. 432(अ) तारीख 7 मई, 2018; और
7. सा.का.जन. 461(अ) तारीख 17 मई, 2018 ।
MINISTRY OF CORPORATE AFFAIRS
NOTIFICATION
New Delhi, the 24th March, 2021
G.S.R. 206(E).—In exercise of the powers conferred by sections 139, 143, 147 and 148 read with
sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government
hereby makes the following rules further to amend the Companies (Audit and Auditors) Rules, 2014,
namely:—[भाग II—खण् ड 3(i)] भारत का रािपत्र : असाधारण 3
1. Short title and commencement.- (1) These rules may be called the Companies (Audit and Auditors)
Amendment Rules, 2021.
(2) They shall come into force with effect from the 1st day of April, 2021.
2. In the Companies (Audit and Auditors) Rules, 2014, in rule 11,-
(1) clause (d) shall be omitted.
(2) after clause (d), the following clauses shall be inserted, namely:-
“(e) (i) Whether the management has represented that, to the best of it’s knowledge and belief, other than as
disclosed in the notes to the accounts, no funds have been advanced or loaned or invested (either from
borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other
person(s) or entity(ies), including foreign entities (“Intermediaries”), with the understanding, whether
recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in
other persons or entities identified in any manner whatsoever by or on behalf of the company (“Ultimate
Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(ii) Whether the management has represented, that, to the best of it’s knowledge and belief, other than as
disclosed in the notes to the accounts, no funds have been received by the company from any person(s) or
entity(ies), including foreign entities (“Funding Parties”), with the understanding, whether recorded in writing
or otherwise, that the company shall, whether, directly or indirectly, lend or invest in other persons or entities
identified in any manner whatsoever by or on behalf of the Funding Party (“Ultimate Beneficiaries”) or
provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
(iii) Based on such audit procedures that the auditor has considered reasonable and appropriate in the
circumstances, nothing has come to their notice that has caused them to believe that the representations under
sub-clause (i) and (ii) contain any material mis-statement.
(f) Whether the dividend declared or paid during the year by the company is in compliance with section 123
of the Companies Act, 2013.
(g) Whether the company has used such accounting software for maintaining its books of account which has a
feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all
transactions recorded in the software and the audit trail feature has not been tampered with and the audit trail
has been preserved by the company as per the statutory requirements for record retention.”.
[F. No.1/33/2013.CL-V (Part)]
K.V.R. MURTY, Jt. Secy.
Note: The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-
section (i) vide number G.S.R. 246(E), dated the 31st March, 2014 and subsequently amended as
follows:-
1. G.S.R. 722 (E) dated the 14th October, 2014;
2. G.S.R. 972 (E) dated the 14th December, 2015;
3. G.S.R. 307(E) dated the 30th March, 2017;
4. G.S.R. 621(E) dated the 22nd June, 2017;
5. G.S.R. 174(E) dated the 16th February, 2018;
6. G.S.R. 432(E) dated the 7th May, 2018; and
7. G.S.R. 461(E) dated the 17th May, 2018.
Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064
and Published by the Controller of Publications, Delhi-110054.