MCA UPDATES: MCA has amended the Companies (Audit and Auditors) Rules, 2014, the Companies (Accounts) Rules 2014 and Schedule III of the Companies Act, 2013.

MCA UPDATES: MCA has amended the Companies (Audit and Auditors) Rules, 2014, the Companies (Accounts) Rules 2014 and Schedule III of the Companies Act, 2013.

MCA UPDATES

The MCA has issued many circulars/ notifications on March 24, 2021 in which the MCA has amended the Companies (Audit and Auditors) Rules, 2014, the Companies (Accounts) Rules 2014 and Schedule III of the Companies Act, 2013.

Relevant amendments are:

1. Every company which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.

2. Audit Report of the Company shall include:
a. The Company has not advanced, loaned or invested in other Company and that other Company has invested, loan, advanced in third entity with common understanding.
b. The Company has not received any amount as aforesaid.
c. Auditor representation regarding the aforesaid.
d. Dividend paid or declared are in compliance.
e. Statement regarding Accounting software.

3. As per the amendment in Schedule III, following new disclosures have been mandatory: Disclosure of Shareholding of Promoters; Trade Payables ageing schedule with age 1 year, 1-2 year, 2-3 year & More than 3 years; Reconciliation of the gross and net carrying amounts of each class of assets; Trade Receivables ageing schedule with age 1 year, 1-2 year, 2-3 year & More than 3 years; Detailed disclosure regarding title deeds of Immovable Property not held in name of the Company; Disclosure regarding revaluation & CWIP ageing; Loans or Advances granted to promoters, directors, KMPs and the related parties; Details of Benami Property held; Reconciliation and reasons of material discrepancies, in quarterly statements submitted to bank and books of accounts; Disclosure where a company is a declared wilful defaulter by any bank or financial Institution; Relationship with Struck off Companies; Pending registration of charges or satisfaction with Registrar of Companies; Compliance with number of layers of companies; Disclosure of 11 Ratios; Compliance with approved Scheme(s) of Arrangements; Utilization of Borrowed funds and hare premium; Details of transaction not recorded in the books that has been surrendered or disclosed as income in the tax assessments; Disclosure regarding Corporate Social Responsibility; Details of Crypto Currency or Virtual Currency.

The said amendments shall come in force w.e.f. April 1, 2021.

The said circulars/notifications shared herewith for your information and records.

1. Mandatory use of Accounting Software having Audit Trail

From FY commencing on 01.04.2021, every Company shall use Accounting Software having feature to record audit trail of each transaction, creating the edit log of changes made & ensuring that the audit trail cannot be disabled.

Link: http://mca.gov.in/Ministry/pdf/AccountsAmendmentRules_24032021.pdf

2. Other Matters to be Included in Auditors Report

a. Reporting regarding advances, loans & Investment other than disclosed in notes to accounts.
b. Receiving of funds for further lending or investing other than disclosed in notes to accounts.
c. Dividend declared or paid is in compliance of section 123 of CA, 2013.
d. Comment of use of Accounting Software having Audit Trail & other rules therein.

Link: http://mca.gov.in/Ministry/pdf/AuditAuditorsAmendmentRules_24032021.pdf

3. Amendments in Schedule III from 1st day of April, 2021

As per the amendments many new disclosure has been mandatory as detailed below:

a. Disclosure of Shareholding of Promoters
b. Trade Payables ageing schedule with age 1 year, 1-2 year, 2-3 year & More than 3 years
c. Reconciliation of the gross and net carrying amounts of each class of assets
d. Trade Receivables ageing schedule with age 1 year, 1-2 year, 2-3 year & More than 3 years
e. Detailed disclosure regarding title deeds of Immovable Property not held in name of the Company.
f. Disclosure regarding revaluation & CWIP ageing.
g. Loans or Advances granted to promoters, directors, KMPs and the related parties
h. Details of Benami Property held
i. Reconciliation and reasons of material discrepancies, in quarterly statements submitted to bank and books of accounts.
j. Disclosure where a company is a declared wilful defaulter by any bank or financial Institution
k. Relationship with Struck off Companies
l. Pending registration of charges or satisfaction with Registrar of Companies
m. Compliance with number of layers of companies
n. Disclosure of 11 Ratios
o. Compliance with approved Scheme(s) of Arrangements
p. Utilization of Borrowed funds and share premium
q. Details of transaction not recorded in the books that has been surrendered or disclosed as income in the tax assessments
r. Disclosure regarding Corporate Social Responsibility
s. Details of Crypto Currency or Virtual Currency

Link: http://mca.gov.in/Ministry/pdf/ScheduleIIIAmendmentNotification_24032021.pdf

Note: The MCA portal will not be available between 08:00 A.M. to 06:00 P.M. on March 27, 2021 due to planned quarterly maintenance activity.