In my message for the previous month, I had reached out to you, inviting suggestions for initiatives which you would like BCAS to carry out. I am overwhelmed by the response. I’m sure your feedback will go a long way in improving our Society; we will try to implement the maximum possible suggestions.
ICAI Leadership: ICAI elected its new President and Vice-President for the term 2020-2021. CA. Atul Kumar Gupta has been elected President and CA. Nihar Jambusaria Vice-President with effect from 12th February, 2020. Both leaders are widely respected for their strong organisational skills, deep insight into the affairs of the profession and for their enormous contribution to the cause of our profession during their terms with the Central Council. We congratulate them on their new roles and wish them all the best for achieving enormous success in taking the profession to new peaks and measure up to the expectations of all members. I look forward to working closely with the ICAI, especially its new leaders, and strengthen the co-operation between the ICAI and the BCAS. I am also proud to inform you that Nihar Jambusaria is a life member of our Society since 1995.
BCAS @ your Doorstep: This is another initiative of our Society wherein we provide tailor-made training to our corporate members and other corporates at their doorstep, deploying our faculty and expertise based on the corporate’s training needs. I am happy to inform you that last month we conducted training for the credit officers of a large public sector bank on understanding financial statements of borrowers prepared under Ind AS, various disclosures and understanding the various comments like audit modifications, emphasis of matter, Key Audit Matters and other matters in an Auditor’s Report. The session was very interactive and two live case studies of large corporate borrowers (under financial stress) were discussed threadbare. These credit officers could gain experience in better understanding the financial statements, thus substantially improving their credit appraisal, supervision and monitoring skills. Our efforts were well appreciated and we look forward to undertaking more such training for corporates under our umbrella of ‘BCAS @ your Doorstep’.
MCA’s Consultation Paper: In February, the Ministry of Corporate Affairs issued a notice inviting suggestions and comments along with justifications on a consultation paper to examine the existing provisions of law and make suitable amendments therein to enhance audit independence and accountability. This paper has raised several questions on burning and sensitive issues such as economic concentration of audits, non-audit services to audit clients, joint audits in case of larger companies and public interest entities, proposed panel of auditors (like CAG / RBI / NFRA), imposition of concurrent audits, restriction on the number of audit firms a group can have in the whole of India, disclosure requirement on probability of default on the lines of credit rating agencies, submitting quarterly returns to SEBI of unlisted companies whose parent is listed, development of a ‘Composite Audit Quality Index’ for auditors and audit firms to improve accountability, resignation of auditors and other similar matters. The sole objective of this was to solicit the views and comments of other Government Departments, Regulatory Agencies and the general public on suggestions relating to amendments in existing law to enhance audit independence, audit quality and accountability. The Accounting and Auditing Committee of our Society met at short notice, deliberated in detail on all the issues raised by this paper and sent our response and representation to MCA well in time, keeping in mind the interests of our members. The response of the Society has been mailed to all the members and is also available for viewing on our website and all other social media platforms.
CARO 2020: This is issued with the objective of strengthening the corporate governance framework under the Companies Act, 2013; under the powers conferred under sub-section (11) of section 143 of the Companies Act, 2013. the Central Government has notified the Companies (Auditor’s Report) Order, 2020 (CARO, 2020). The eligibility criteria in CARO, 2020 have not been changed and hence it shall be applicable to all those companies on which CARO, 2016 has been applicable. CARO 2020 has 21 clauses and 47 sub-clauses, thus enhanced reporting requirements by the auditors including reporting on proceedings initiated / pending if any against the company under the Benami Transactions (Prohibition) Act, 1988; stricter reporting on discrepancies noticed on physical verification of inventory; reporting on mismatches in physical stock and those reported to lending banks / financial institutions; disclosure of unrecorded transactions in income tax assessments; utilisation of funds; GST dues payments and cash losses; declaration of company as wilful defaulter by any lender; disclosure of whistle-blower complaints; any resignation of the statutory auditors during the year, and so on. Reporting under CARO, 2020 would necessitate enhanced due diligence, reporting responsibility and disclosures on the part of auditors and has been designed to bring in greater transparency in the financial state of affairs of companies. Members are requested to be well informed and equipped to report under CARO, 2020 as it is applicable for audit of financial statements of eligible companies for the financial years commencing on or after 1st April, 2019.
Before I sign off, let me offer my warm wishes to you and your family on the joyous occasion of Holi! I wish with all my heart that it brings more colours to your life.
CA. Manish Sampat