REGULATORY CHANGES IN AUDIT AND ACCOUNTING STANDARDS POST-COMPANIES ACT, 2013

Regulatory Changes in Audit and Accounting Standards Post-Companies Act, 2013

The enactment of the Companies Act, 2013 in India brought about significant regulatory changes in the landscape of audit and accounting standards. These alterations aimed to enhance transparency, corporate governance, and accountability. Several key points illustrate the notable shifts in the regulatory framework:

1. Introduction of New Accounting Standards: The Companies Act, 2013 introduced a shift from the previously followed Indian GAAP (Generally Accepted Accounting Principles) to the adoption of Indian Accounting Standards (Ind AS). This convergence aligned India’s accounting standards with the globally accepted International Financial Reporting Standards (IFRS), enhancing comparability and transparency in financial reporting.

2. Strengthened Corporate Governance Requirements: The Act emphasized strengthening corporate governance by introducing stricter regulations related to board composition, independent directors, audit committees, and disclosures. This aimed to ensure a higher level of accountability and transparency in corporate decision-making processes.

3. Increased Responsibility of Auditors: The Act imposed greater responsibility on auditors by enhancing their accountability, independence, and oversight. It introduced provisions related to rotation of audit firms, restrictions on non-audit services provided to clients, and stringent penalties for non-compliance.

4. Establishment of National Financial Reporting Authority (NFRA): One of the pivotal changes post the Companies Act, 2013 was the establishment of NFRA, an independent regulatory body overseeing the quality of financial reporting, accounting, and auditing standards. NFRA’s role includes investigation and disciplinary actions against auditors and auditing firms, ensuring adherence to prescribed standards.

5. Focus on Related Party Transactions (RPTs) and Disclosures: The Act mandated stringent norms concerning related party transactions, requiring comprehensive disclosures and approval mechanisms. This aimed to mitigate conflicts of interest and enhance transparency regarding transactions between related parties.

6. Emphasis on Integrated Reporting and Sustainability: In alignment with global trends, the Act encouraged companies to adopt integrated reporting, encompassing financial, environmental, social, and governance aspects. This shift aimed to promote sustainable business practices and holistic reporting to stakeholders.

7. Continuous Updates and Amendments: Post the implementation of the Companies Act, 2013, there have been ongoing updates and amendments to accounting and auditing standards to align with evolving business landscapes, international practices, and emerging regulatory requirements.

The Companies Act, 2013 has significantly reshaped the audit and accounting standards in India, fostering a more robust regulatory environment aimed at bolstering transparency, accountability, and the overall credibility of financial reporting within corporate entities.