Amendment Notes For Auditing

COMPANIES ACT 1956 vs.
COMPANIES ACT 2013 for CA IPCC & Final Auditing

Compiled by: CA. Pankaj Garg Page 1
Accounts, Audit, Dividend & Audit Committee

Table Showing Corresponding Sections of Accounts and Audit in Companies Act 2013
Companies Act 1956 Companies Act 2013
Section
No.
Heading Section
No.
Heading
205 Di vi dend to be pai d onl y out of
profi ts
123 Decl arati on of Di vi dend
205A Unpai d di vi dend to be transferred to
speci al di vi dend account
123,
124
Decl arati on of Di vi dend and Unpai d
Di vi dend Account
205B Payment of unpai d or uncl ai med
di vi dend
124 Unpai d Di vi dend Account
205C Establ i shment of I nvestor Educati on
and Protecti on Fund
125 I nvestor Educati on and Protecti on
Fund
206 Di vi dend not to be pai d except to
regi stered sharehol ders or to thei r
order to thei r bankers
123 Decl arati on of Di vi dend
206A Ri ght to Di vi dend, ri ghts shares and
bonus shares to be hel d i n abeyance
pendi ng regi strati on of transfer of
shares
126 Ri ght to Di vi dend, ri ghts shares and
shares
207 Penal ty for fai l ure to di stri bute
di vi dends wi thi n30 days
127 Puni shment for fai l ure to di stri bute
di vi dends.
208 Power of company to pay i nterest out
of capi tal i n certai n cases
- -
209 Books of account to be kept by
company
2(13) Books of account
128 Books of account, etc., to be kept by
company
209A I nspecti on of books of account, etc.,
of compani es
207 Conduct of i nspecti on and i nqui ry
208 Report on i nspecti on made
210 Annual accounts and bal ance sheet 129 Fi nanci al statement
210A Consti tuti on of Nati onal Advi sory
Commi ttee on Accounti ng Standards
132 Consti tuti on of Nati onal Fi nanci al
Reporti ng Authori ty
211 Form and contents of bal ance sheet
and profi t and l oss account
2(2) Accounti ng Standards
129 Fi nanci al statement
133 Central Government to prescri be
accounti ng standards
212 Bal ance sheet of hol di ng company to
i ncl ude certai n parti cul ars as to i ts
subsi di ari es
-- --
213 Fi nanci al year of hol di ng company
and subsi di ary
-- --
214 Ri ght of hol di ng companys
representati ves and members
company
215 Authenti cati on of bal ance sheet and
profi t and l oss account
134 Fi nanci al Statement, Boards report,
etc.
COMPANIES ACT 1956 vs. COMPANIES ACT 2013 for CA IPCC & Final Auditing

216 Profi t and l oss account to be annexed
and audi tors report to be attached to
bal ance sheet
etc.
217 Boards report 134 Fi nanci al Statement, Boards report,
etc.
218 Penal ty for i mproper i ssue,
ci rcul ati on or publ i cati on of bal ance
sheet or profi t and l oss account
-- --
219 Ri ght of member to copi es of bal ance
sheet and audi tors report
136 Ri ght of member to copi es of audi ted
fi nanci al statement
220 Three copi es of bal ance sheet, etc., to
be fi l ed wi th Regi strar
137 Copy of fi nanci al statement to be
fi l ed wi th Regi strar
221 Duty of offi cer to make di scl osure of
payments, etc.
-- --
222 Constructi on of references to
documents annexed to accounts
-- --
223 Certai n compani es to publ i sh
statement i n the Form i n Tabl e F i n
Schedul e I
-- --
224 Appoi ntment and remunerati on of
audi tors
139 Appoi ntment of audi tors
142 Remunerati on of audi tors
224A Audi tor not to be appoi nted except
wi th the approval of the company by
speci al resol uti on i n certai n cases
-- --
225 Provi si ons as to resol uti ons for
appoi nti ng or removi ng audi tors
140 Removal , resi gnati on of audi tor and
gi vi ng of speci al noti ce
226 Qual i fi cati ons and di squal i fi cati ons
of audi tors
141 El i gi bi l i ty, qual i fi cati ons and
di squal i fi cati ons of audi tors
227 Power and duti es of audi tors 143 Power and duti es of audi tors and
Audi ti ng Standards
228 Audi t of accounts of branch offi ce of
company
143 Powers and duti es of audi tors and
Audi ti ng Standards
229 Si gnature of Audi t report, etc. 145 Audi tor to si gn audi t reports, etc.
230 Readi ng and i nspecti on of audi tors
report
145 Audi tor to si gn audi t reports, etc.
231 Ri ght of audi tor to attend general
meeti ng
146 Audi tors to attend general meeti ng
232 Penal ty for non-compl i ance by
audi tor wi th secti ons 225 to 231
147 Puni shment for contraventi on
233 Penal ty for non-compl i ance by
audi tor wi th secti ons 227 and 229
147 Puni shment for contraventi on
233A Power of Central Government to
di rect speci al audi t i n certai n cases
-- --
233B Audi t of cost accounts i n certai n
cases
148 Central Government to speci fy audi t
of i tems of cost i n respect of certai n
compani es
292A Audi t Commi ttee 177 Audi t Commi ttee

Table Showing Corresponding Sections of Accounts and Audit in Companies Act 1956
Section of Companies Act, 2013
Corresponding sections of
Companies Act, 1956
123 Decl arati on of Di vi dend 205 Di vi dend to be pai d onl y out of profi ts
205A
(3)
Unpai d di vi dend to be transferred to
206 Di vi dend not to be pai d except to
regi stered sharehol ders or to thei r
order to thei r bankers
124 Unpai d Di vi dend Account 205A Unpai d di vi dend to be transferred to
205B Payment of unpai d or uncl ai med
di vi dend
125 I nvestor Educati on and Protecti on
Fund
205C Establ i shment of I nvestor Educati on
and Protecti on Fund
126 Ri ght to Di vi dend, ri ghts shares and
shares
206A Ri ght to Di vi dend, ri ghts shares and
shares
127 Puni shment for fai l ure to di stri bute
di vi dends
207 Penal ty for fai l ure to di stri bute
di vi dends wi thi n30 days
company
209 Books of account to be kept by
company
214 Ri ghts of hol di ng companys
representati ves and members
129 Fi nanci al Statement 210 Annual accounts and bal ance sheet
211 Form and contents of bal ance sheet and
130 Re-openi ng of accounts on Courts or
Tri bunal s orders
-- --
131 Vol untary revi si on of fi nanci al
statements or Boards report
-- --
132 Consti tuti on of Nati onal Fi nanci al
Reporti ng Authori ty
210A Consti tuti on of Nati onal Advi sory
Commi ttee on Accounti ng Standards
133 Central Government to prescri be
accounti ng standards
211(3) Form and contents of bal ance sheet and
etc.
215 Authenti cati on of bal ance sheet and
216 Profi t and l oss account to be annexed
and audi tors report to be attached to
bal ance sheet
217 Boards report

135 Corporate Soci al Responsi bi l i ty -- --
136 Ri ght of member to copi es of audi ted
fi nanci al statement
219 Ri ght of member to copi es of bal ance
sheet and audi tors report
137 Copy of fi nanci al statement to be fi l ed
wi th Regi strar
220 Three copi es of bal ance sheet, etc., to
be fi l ed wi th Regi strar
138 I nternal Audi t -- --
139 Appoi ntment of audi tors 224 Appoi ntment and remunerati on of
audi tors
619 Appl i cati on of secti ons 224 to 233 to
Government compani es
140 Removal , resi gnati on of audi tor and
gi vi ng of speci al noti ce
225 Provi si ons and di squal i fi cati ons of
audi tors
141 El i gi bi l i ty, Qual i fi cati ons and
di squal i fi cati ons of audi tors
226 Qual i fi cati on and di squal i fi cati ons of
audi tors
142 Remunerati on of audi tors 224(8) Appoi ntment and remunerati on of
audi tors
143 Powers and duti es of audi tors and
audi ti ng standards
227 Powers and duti es of audi tors
228 Audi t of accounts of branch offi ce of
company
619 Appl i cati on of secti ons 224 to 233 to
Government compani es
144 Audi tor not to render certai n servi ces -- --
145 Audi tor to si gn audi t reports, etc. 229 Si gnature of audi t report, etc.
230 Readi ng and i nspecti on of audi tors
report
146 Audi tors to attend general meeti ng 231 Ri ght of audi tor to attend general
meeti ng
147 Puni shment for contraventi on 232 Penal ty for non-compl i ance wi th
secti ons 225 to 231
233 Penal ty for non-compl i ance by audi tor
wi th secti ons 227 and 229
148 Central Government to speci fy audi t of
i tems of cost i n respect of certai n
compani es
233B Audi t of cost accounts i n certai n cases
177 Audi t Commi ttee 292A Audi t Commi ttee

MAJOR POINT OF DIFFERENCE IN PROVISIONS RELATED WITH ACCOUNTS
Points of
comparison
Companies Act, 2013 Companies Act 1956
(1) (2) (3)

ACCOUNTS
Books of
account in
electronic
mode
Company may keep such books of account or other
rel evant papers i n el ectroni c mode i n such manner as
may be prescri bed.
No provi si on to keep
books of account i n
el ectroni c mode.
Consolidated
F.S.
Mandatory i f company has one or more subsi di ari es or
associ ated or joi nt ventures.
No provi si ons
Requirement
to attach
subsidiary
companys
accounts etc.
to holding
companys
accounts
Requi rement omi tted. I f a company was a
hol di ng company, i t was
requi red to attach to i ts
bal ance sheet a
statement showi ng
hol di ng companys
i nterest i n subsi di ary. -
- Secti on 212(5).
Compulsory
placing of
accounts on
companys
website
A l i sted company shal l al so pl ace i ts F.S. i ncl udi ng
consol i dated F.S. & al l other documents requi red to
be attached or annexed thereto, on i ts websi te,
whi ch i s mai ntai ned by or on behal f of the company.
Every company havi ng a subsi di ary or subsi di ari es
shal l , -
(a) Pl ace separate audi ted accounts i n respect of
each of i ts subsi di ary on i ts websi te, i f any;
(b) Provi de a copy of separate audi ted F.S. i n respect
of each of i ts subsi di ary, to any sharehol der of
the company who asks for i t.
Not requi red
Re-opening
accounts on
courts or
Tribunals
orders
Provi si ons contai ned i n secti on 130. No provi si ons
Voluntary
revision of
F.S. or
Boards
report
Provi si ons contai ned i n secti on 131 Such vol untary
reopeni ng al l owed wi th Tri bunal s approval .
No provi si ons.

NATIONAL FINANCIAL REPORTING AUTHORITY
NACAS v.
NFRA
NACAS renamed as Nati onal Fi nanci al Reporti ng
Authori ty (NFRA).
NFRA shal l consi der the I FRS & other i nternati onal l y
accepted accounti ng & audi ti ng pol i ci es and
standards whi l e maki ng recommendati ons on such
matters to the C.G. whi ch wi l l i mprove the
competi ti veness of I ndi an Compani es.
NFRA i s al so empowered wi th quasi -judi ci al powers
to ensure i ndependent oversi ght over CAs.
NACAS A mere advi sory
body under the 1956 Act.
Statutory
Recognition
to auditing
standards
The 2013 Act provi des for noti fi cati on of both
mandatory AS and mandatory audi ti ng standards by
the C.G. i n consul tati on wi th the NFRA.
The 1956 Act provi ded
for noti fi cati on by the
C.G. of mandatory AS i n
consul tati on wi th the
NACAS.

REPORT OF BOARD OF DIRECTORS
Disclosures
in Boards
report
Addi ti onal / New di scl osures requi red i n report of the Board
of Di rectors:
Extract of annual return,
Number of meeti ngs of the Board.
A statement on decl arati on gi ven by i ndependent di rectors
[See secti on 149( 6) ].
Companys pol i cy on di rectors appoi ntment &
remunerati on i ncl udi ng cri teri a for determi ni ng
qual i fi cati ons. Posi ti ve attri butes, i ndependence of a
di rector and other matters [see secti on 178(1)/ 178( 3) ].
Expl anati ons or comments by the Board on every
qual i fi cati on, reservati on or adverse remark or di scl ai mer
made by the CS i n practi ce i n hi s secretari al audi t report.
Parti cul ars of l oans, guarantees or i nvestments [See
secti on 186 of the 2013 Act].
Parti cul ars of contracts or arrangements [See secti on
188( 1) of the 2013 Act].
A statement i ndi cati ng devel opment and i mpl ementati on
of a ri sk management pol i cy for the company i ncl udi ng
i denti fi cati on therei n of el ements of ri sk, i f any, whi ch i n
the opi ni on of the Board may threaten the exi stence of the
company.
Detai l s about the pol i cy devel oped and i mpl emented by
the company on CSR i ni ti ati ves taken duri ng the year.
I n the case of a l i sted company and every other publ i c
company havi ng such pai d-up capi tal as may be
prescri bed, a statement i n whi ch formal eval uati on has
been made by the Board of i ts own performance and that
of i ts commi ttees and i ndi vi dual di rectors.
Such other matters as may be prescri bed.
Di scl osures
requi red by the
1956 Act i n the
board of Di rectors
Report.

Directors
Responsibility
Statement
(DRS) in
Boards
Report
The Di rectors Responsi bi l i ty Statement i n the report of the
Board of di rectors shal l contai n the fol l owi ng addi ti onal
decl arati ons
(a) The di rectors, i n the case of a l i sted company, had l ai d
down i nternal fi nanci al control s to be fol l owed by the
company and that such i nternal fi nanci al control s are
adequate and were operati ng effecti vel y.
(b) (b) The di rectors had devi sed proper systems to
ensure compl i ance wi th the provi si ons of thi s Act and
rul es made there under and that such systems were
adequate and operati ng effecti vel y.
Decl arati ons
regardi ng i nternal
fi nanci al control s
and l egal
compl i ance
system not
requi red i n DRS.

CORPORATE SOCIAL RESPONSIBILTIY
Corporate
Social
Responsibility
(CSR)
I n every fi nanci al year, CSR spends of at l east 2% of the
average net profi ts the company made duri ng the 3
i mmedi atel y precedi ng fi nanci al year i s mandatory for
every company sati sfyi ng of the fol l owi ng cri teri a:
Havi ng net worth of Rs. 500 crores or more, or
Havi ng turnover of Rs. 1,000 crores or more, or
Havi ng net profi t of Rs. 5 crores or more
No provi si ons.

INTERNAL AUDIT
Compulsory
internal
audit
Secti on 138 of the 2013 Act provi des as under:
Such cl ass or descri pti on of compani es as may be
prescri bed shal l be requi red to appoi nt an i nternal
audi tor to conduct i nternal audi t of books of account of
the company.
I nternal audi tor shal l be a CA or Cost Accountant or such
other professi onal as may be deci ded by the Board.
The C.G. may make rul es to prescri be the manner i n
whi ch i nternal audi t shal l be conducted and reported.
No provi si ons i n
the 1956 Act as
regards
mandatory
i nternal audi t.

SCHEDULE III OF THE 2013 ACT : GENERAL INSTRUCTIONS FOR PREPARATIONI
OF BALANCE SHEET & STATEMENT OF PROFIT AND LOSS OF A COMPANY
CORRES-
PONDING
TO
SCHEDULE
VI OF THE
1956 ACT
Schedul e I I I of the 2013 Act i s same as Revi sed Schedul e VI of the 1956 Act expect
that Schedul e I I I contai ns general i nstructi ons for the preparati on of consol i dated
F.S. of company and i ts subsi di ari es as preparati on of consol i dated accounts has been
made mandatory by the 2013 Act.
The GI (CFS) No. 1 provi des that the consol i dated F.S. shal l di scl ose i nformati on as
per the appl i cabl e AS i ncl udi ng (i ) Profi t and Loss attri butabl e to mi nori ty i nterest
and to owners of the parent i n the statement of P & L (thi s shal l be presented as
al l ocati on for the peri od) (i i ) Mi nori ty I nterests i n the bal ance sheet wi thi n equi ty
(Thi s shal l be presented separatel y from the equi ty of owners of the parent).
- GI (CFS) No. 2 provi des for di scl osure of addi ti onal i nformati on regardi ng share of
vari ous enti ti es (parent, subsi di ari es, mi nori ty i nterests i n subsi di ari es, i nvestment
i n associ ates, J Vs) i n consol i dated net assets and consol i dated profi t or l oss.
- GI (CFS) No. 3 provi des that al l subsi di ari es, associ ates and J Vs (whether I ndi an or
forei gn) wi l l be covered under the CFS.
- GI (CFS) No. 4 provi des that an enti ty shal l di scl ose the l i st of subsi di ari es or
associ ates or J Vs whi ch have not been consol i dated and the reasons for not
consol i dati ng.

APPOINTMENT AND ROTATION OF AUDITORS
Appointment
of auditor of
Government
Company
Ti me bound annual appoi ntment or
reappoi ntment of audi tors by CAG for Govt.
compani es (Audi tor to be appoi nted wi thi n 180
days from the commencement of the FY.
I f CAG does not appoi nt fi rst audi tors of Govt.
Company wi thi n 60 days from the date of
regi strati on of the company, the BOD of the
company shal l appoi nt such audi tor wi thi n next
30 days. I n the case of fai l ure of the Board to
appoi nt such audi tor wi thi n next 30 days, i t
shal l i nform members of the company who shal l
appoi nt such audi tor wi thi n 60 days at an EGM.
Casual vacanci es i n the offi ce of audi tor of
Govt. Company to be fi l ed up by the CAG wi thi n
30 days, fai l i ng whi ch the BOD shal l fi l l i t up
wi thi n next 30 days.
Concept of deemed Govt. compani es [Secti on
619B of the 1956 Act] omi tted by the 2013 Act
and repl aced wi th concept of compani es owned
or control l ed, di rectl y or i ndi rectl y by the C.G.
Appoi ntment of audi tors of
Government compani es and
deemed Govt. compani es by
CAG.
Appoi ntment not ti me
bound process.
Appointment
of Auditors of
Companies
other than
Govt.
Companies at
AGM for 5
years tenure
Appoi ntment of audi tors for 5 years tenure
subj ect to rati fi cati on at every AGM.
Where at any annual general meeti ng, no
audi tor i s appoi nted or reappoi nted or
reappoi nted, the exi sti ng audi tor shal l conti nue
to be the audi tor of the company.
No provi si ons i n the 1956
Act for 5 years tenure for
audi tors.
No provi si ons i n the 1956
Act for exi sti ng audi tor to
conti nue i n defaul t of
reappoi ntment at AGM.
Special
resolution
for
appointment
of auditors
Requi rement of speci al resol uti on for
appoi ntment of audi tor dropped

Secti on 224A requi res that
audi tor not to be appoi nted
except wi th the approval of
the company by speci al
resol uti on i n certai n cases.
Power of
C.G.. to
appoint
auditor
The 2013 Act omi ts power of Central Government
to appoi nt audi tors where audi tors where audi tor
not appoi nted or reappoi nted at AGM.
Secti on 224(3) provi des the
appoi ntment by C.G. where
audi tor not appoi nted or
reappoi nted at AGM.
Compulsory
rotation of
auditors
Appl i cabl e to l i sted compani es & cl asses of
compani es as may be prescri bed. I ndi vi dual
audi tor to be rotated after 1 term of 5 year Audi t
Fi rm to be rotated after 2 terms of 5 years.
No requi rement for thi s i n the
1956 Act.

REMOVAL OF AUDITORS
Removal of auditors
before expiry of term
in case of non-Govt.
Companies
Removal of audi tors shal l requi re speci al
resol uti on & previ ous approval of Central Govt.
Ordi nary resol uti on
and pri or approval
of C.G. requi red for
removal of audi tors.
Removal of auditors
before expire of term
in case of Government
Companies
Removal of audi tors of Govt. company before
expi ry of tenure shal l al so requi re speci al
resol uti on and previ ous approval of Central
Govt. (i nstead of removal by CAG).
Removal by CAG
under the 1956 Act.
Procedure for removal
of auditor before
expiry of term
The audi tor sought to be removed shoul d be
gi ven a reasonabl e opportuni ty of bei ng heard.
Thi s si mpl e rul e of natural justi ce repl aces the
l engthy and tedi ous procedure of secti on 225
of the 1956 Act.
Tedi ous and l engthy
procedure under
secti on 225 of the
1956 Act.

RESIGNATION OF AUDITORS
Resignation
of auditors
The audi tor who has resi gned from the company shal l
fi l e wi thi n 30 days of resi gnati on a statement i n the
prescri bed form wi th the company as wel l as wi th the
ROC i ndi cati ng reasons and other facts as may be
rel evant wi th regard to hi s resi gnati on.
I n case of compani es referred to secti on 139(5) of the
2013 Act, the audi tor shal l al so fi l e such statement wi th
the CAG, i ndi cati ng the reasons and other facts an may
be re rel evant wi th regard to hi s resi gnati on.
I f audi tor does not fi l e such statement as above, he shal l
be puni shabl e wi th a fi ne not l ess than Rs. 50,000 but
whi ch may extend to Rs. 5,00,000.
No statutory
obl i gati ons on
audi tor who resi gns.

DIRECTION BY TRIBUNAL TO CHANGE AUDITORS
Direction by
Tribunal to
company to
change its
auditors
Tri bunal may di rect the company to change i ts audi tors
i f i t i s sati sfi ed that audi tor of a company has ei ther
di rectl y or i ndi rectl y acted i n a fraudul ent manner or
abetted or col l uded i n any fraud by or i n rel ati on to the
company or i ts offi cers or di rectors.
I f appl i cati on i s made by C.G. and the Tri bunal i s
sati sfi ed that any change of audi tor i s requi red, i t shal l
wi thi n 15 days of the recei pt of the appl i cati on make an
order that he shal l not functi on as audi tor and the C.G.
may appoi nt another audi tor i n hi s pl ace.
Audi tor agai nst whom order passed not el i gi bl e to be
audi tor of any company for 5 years.
No such provi si ons.


AUDIOTR QUALIFICATIONS & DISQUALIFICATIONS
Restricted
State
auditors
No l onger qual i fi ed under secti on 141 of the 2013
Act to be audi tors of a company.
Qual i fi ed to be audi tors
of compani es under
Secti on 226(2) of the
1956 Act.
Firm/ LLP of
chartered
Accountants.
The Chartered Accountants Act, 1949 as amended
i n 2006 now al l ows CAs to enter i nto partnershi ps
wi th other professi onal s.
I n vi ew of thi s, secti on 141(2) of the 2013 Act
provi des that i f a fi rm i ncl udi ng LLP i s appoi nted
as an audi tor of a company, onl y the partners who
are CA i n practi ce shal l be authori zed by the fi rm
to act and si gn on behal f of the fi rm.
The 1956 Act provi ded
that a fi rm coul d be
appoi nted as edi tors of
a company onl y i f all i ts
partners are CAs
practi ci ng i n I ndi a.
Auditors
disqualify-
cations
The l i st of di squal i fi cati ons for appoi ntment as
audi tors under secti on 141 of the 2013 Act i s l onger
than under secti on 226(3) of the 1956 Act. The
fol l owi ng are the new di squal i fi cati ons that were
not there i n the 1956 Act:
A person or a fi rm who has busi ness rel ati onshi p
wi th the company, or i ts subsi di ary, or i ts
hol di ng or associ ate company or subsi di ary of
such hol di ng company or associ ate company of
such nature as may be prescri bed.
A person whose rel ati ve i s a di rector or i s i n the
company as a di rector or key manageri al
personnel ;
A person convi cted for fraud and 10 years not
el apsed from date of convi cti on;
A person whose subsi di ary or associ ate company
or any other form of enti ty i s engaged i n
consul ti ng and speci al i zed servi ces as provi ded
i n secti on 144 of the 2013 Act.
Much narrower l i st of
di squal i fi cati ons under the
1956 Act compared to the
2013 Act.
Indebtedness
of relative of
auditor
Even i f rel ati ve or partner of a person i s i ndebted to
the company, or i ts subsi di ary, or i ts hol di ng
company, the sai d person shal l be di squal i fi ed from
bei ng appoi nted as audi tor of a company.
I ndebtedness of a rel ati ve
was not a di squal i fi cati on
under the 1956 Act.
Indebtedness
to an
associate
company
Di squal i fi cati on for audi tor Not a di squal i fi cati on for
audi tor

RIGHTS & DUTIES OF AUDITORS
Compliance
with auditing
standards
Every audi tor shal l compl y wi th audi ti ng standards.
Audi ti ng
standar ds not
r ecogni zed nor
made
mandator y.
Rights of
auditor of
holding
company
The audi tor of a hol di ng company shal l al so have the ri ght of
access to the records of al l i ts subsi di ari es i nsofar as i t rel ates to
the consol i dati on of i ts F.S. wi th that of i ts subsi di ari es.
No Provi si on
Auditors Duty
to comment
regarding
internal
financial
controls
The audi tors report to state whether company has adequate
i nternal fi nanci al control s system i n pl ace and operati ng
effecti veness of such control s.
No Provi si on
Auditors
report in
case of a
Govt.
company
I n the case of a Government company, the audi tors report shal l ,
among other thi ngs, i ncl ude:
(a) the di recti ons, i f any, i ssued by the CAG.
(b) the acti on taken on such di recti ons and the i mpact thereof on
the companys F.S.
No Provi si on
Duty of
auditor to
report fraud
to C.G.
I f an audi tor of a company, i n the course of the performance
of hi s duti es as audi tor, has r eason to bel i eve that an offence
i nvol vi ng fraud i s bei ng or has been commi tted agai nst the
company by offi cers or empl oyees of the company, he shal l
i mmedi atel y report the matter to the C.G. wi thi n such ti me
and i n such manner as may be prescri bed.
No duty to whi ch an audi tor of a company may be subj ect to
shal l be regarded as havi ng been contravened by reason of hi s
reporti ng the matter as above i f i t i s done i n good fai th.
These provi si ons shal l mutati s appl y to a -----
(a) the Cost Accountant i n practi ce conducti ng cost audi t
under secti on 148 of the 2013 Act; or
(b) the Company Secretary i n practi ce conducti ng Secretari al
Audi t under secti on 204 of the 2013 Act;
I f any audi tor, cost accountant or CS i n practi ce do not report
fraud commi tted or bei ng commi tted as above, he shal l be
puni shabl e wi th fi ne whi ch shal l not be l ess than Rs. 1 Lac but
whi ch may extend to Rs. 25 Lacs
No such
duty/
provi si ons
Auditor not
to render
certain
services
Secti on 144 of the 2013 Act speci fi es certai n servi ces not to be
rendered by audi tor to company or to i ts hol di ng company or
subsi di ary.
No provi si on
Auditors
attendance
at general
meetings
Audi tor shal l , unl ess otherwi se exempted by the company, attend
any general meeti ng:
(i ) by hi msel f or
(i i ) through hi s authori zed
representati ve who i s qual i fi ed to be an audi tor.
Audi tors
attendance
at general
meeti ngs
opti onal ,


BRANCH AUDIT
Exemption
from Branch
Audit
Sec. 143 contai ns no such provi si on
empoweri ng C.G. to exempt branch offi ces
from audi t.
Sec. 228 empowers the C.G. to
frame rul es provi di ng for the
exempti on of any branch offi ce
from audi t to the extent
speci fi ed i n the rul es.

COST AUDIT
Companies
required to
maintain cost
records
Secti on 148 empowers the C.G. to
prescri be cost records for any cl ass or
cl asses of compani es engaged i n
prescri bed servi ces.
I t al so provi des that before prescri bi ng
cost records i n respect of any cl ass of
compani es regul ated under a speci al Act,
the C. G. shal l consul t the regul atory body
consti tuted or establ i shed under such
speci al Act.
Sec. 209(1)(d) empowers the
C.G. to prescri be cost records
for any cl ass or cl asses of
compani es engaged i n the
producti on, processi ng
manufacturi ng or mi ni ng
acti vi ti es.
Previous
approval of
C.G. for the
Appointment
of cost auditor
The previ ous approval of Central Government
i s no l onger requi red for appoi ntment of cost
audi tor as secti on 148 of the 2013 Act
di spenses wi th thi s requi rement.
Previ ous approval of Central
Govt. requi red for appoi ntment
of cost audi tor.
Remuneration
of cost auditor
Remunerati on of cost audi tor to be
determi ned by members of the company i n
such manner as may be prescri bed.
Determi ned by the BOD.
Provisions if
sufficient
number of cost
accountants
not available
Thi s provi si on has been omi tted from the
2013 Act presumabl y as there are suffi ci ent
numbers of practi ci ng cost accountants now.
Secti on 233B provi des that i f
the C.G. i s of opi ni on that
suffi ci ent number of cost
accountants are not avai l abl e,
i t may, by noti fi cati on i n the
Offi ci al Gazette, di rect that,
CAs who possess the
prescri bed qual i fi cati ons, may
al so conduct the audi t of the
cost accounts of compani es.
Power of C.G.
to direct the
company
whose cost
accounts have
been audited
to circulate to
its members
portions of
cost audit
report
Thi s provi si on has been omi tted from the
2013 Act.
Sec. 233B provi ded that C.G.
may di rect the company whose
cost accounts have been
audi ted to ci rcul ate to i ts
members, al ong wi th the noti ce
of the AGM to be hel d for the
fi rst ti me after the submi ssi on
of such report, the whol e or
such porti on of the sai d report
as i t may speci fy i n thi s behal f.

Cost Auditing
Standards
made
mandatory
The 2013 Act recogni zes cost audi ti ng
standards i ssued by I nsti tute of Cost
Accountants of I ndi a wi th Central Govt.
approval . 2013 Act makes i t mandatory for
cost audi tor to compl y wi th CAS whi l e
conducti ng cost audi t.
No provi si ons regardi ng Cost
Audi ti ng Standards.

DECLARATION AND PAYMENT OF DIVIDEND
Whether dividend
declaration/
payment bared if
company is in
default of
repayment of
deposits?
Yes. A company whi ch fai l s to compl y
wi th secti ons 73 and 74 of the 2013 Act
(repayment of deposi ts accepted before
commencement of the Act) shal l not, so
l ong as such fai l ure conti nues, decl are
any di vi dend on i ts equi ty shares.
No such bar i n the 1956 Act.
Dividend only from
free reserves
Thi rd provi so to secti on 123(1) of the
2013 Act provi des that no di vi dend shal l
be decl ared or pai d by a company from
i ts reserves other than free reserves.
No express provi si ons i n thi s
regards i n the 1956 Act.
Whether past
losses required to
be set off before
declaring dividend
Not requi red. No express provi si ons i n
Compani es Act 2013.
Requi red under fi rst provi so to
cl ause (b) to secti on 205(1) of
the 1956 Act.
Power of C.G. to
permit in public
interest
declaration of
dividend without
providing dep.
No such power conferred on the C.G. by
the 2013 Act.
The C.G. may, i n the publ i c
i nterest al l ow any company to
decl are or pay di vi dend for any
FY out of the profi ts for that
year out of the profi ts for the
year wi thout provi di ng for dep.
Whether transfer to
reserves
compulsory?
No. A company may, before the
decl arati on of any di vi dend i n any FY,
transfer such percentage of i ts profi ts
for that FY as i t may consi der
appropri ate to the reserves of the
company.
Where the company proposes
to decl are di vi dend for any
fi nanci al year (at a rate
exceedi ng 10% of the pai d- up
capi tal ) out of the profi ts for
that year, the company has to
transfer to reserve such
percentage of profi ts (not
exceedi ng 10 per cent) as
prescri bed i n the Compani es
(Transfer of Profi t to
Reserves) Rul es, 1975.

Payment of
dividend through
electronic mode to
registered
shareholder
Expressl y al l owed. No express provi si ons al l owi ng
thi s.
Unpaid Dividend
Account
Secti on 124(6) of the 2013 Act
provi des that al l shares i n respect of
whi ch unpai d or uncl ai med di vi dend
has been transferred to the I nvestor
Educati on and Protecti on Fund shal l
al so be transferred by the company
i n the name of I nvestor Educati on
and Protecti on Fund al ong wi th a
statement contai ni ng such detai l s as
may be prescri bed.
Any cl ai mant of shares transferred
above shal l be enti tl ed to cl ai m the
transfer of shares from I nvestor
Educati on and Protecti on Fund i n
accordance wi th such procedure and
on submi ssi on of such documents as
may be prescri bed.
Sec. 205 provi des that amounts
i n the unpai d di vi dend account
of compani es whi ch have
remai ned unpai d for a peri od
of 7 Years from the date they
become due for payment shal l
be transferred by a company to
I nvestor Educati on and
Protecti on Fund.
Right of Investor to
make a claim to
Investor Education
and Protection
Fund.
Sec. 125 provi des that cl ai m of an
i nvestor over a di vi dend or benefi t
from a securi ty not cl ai med for more
than 7 years woul d not be
exti ngui shed.
I n other words, any person cl ai mi ng
to be enti tl ed to such di vi dend or
money may appl y to the authori ty
admi ni steri ng the fund for payment.
I nvestor/ Deposi tor/ Sharehol d
er/ Debenture hol der cannot
cl ai m the amount from the
fund / the company after the
expi ry of 7 years peri od as
above.

AUDIT COMMITTEE
For which
companies it is
mandatory to
constitute audit
committee
Every l i sted company and such other cl ass or
cl asses of compani es, as may be prescri bed.
Every publ i c company
havi ng pai d-up capi tal of
not l ess than fi ve crores
of rupess.
Composition of the
audit committee
Mi ni mum of three di rectors.
I ndependent di rectors formi ng a majori ty.
Majori ty of members i ncl udi ng chai rperson
shal l be persons wi th abi l i ty to read and
understand the fi nanci al statements.
The Audi t Commi ttee shal l
consi st of not l ess than 3
di r ector s & such number of
other di r ector s as the Boar d
may deter mi ne of whi ch 2/ 3 of
the total number of member s
shal l be di r ector s, other than
managi ng or whol e- ti me
di r ector s.

Role and functions
of the audit
committee
Every Audi t Commi ttee shal l act i n
accordance wi th the terms of reference
speci fi ed i n wri ti ng by the Board whi ch shal l
i ncl ude, among other thi ngs-
(a) the recommendati on for appoi ntment,
remunerati on and terms of engagement of
audi tors of the company,
(b) revi ew and moni tor the audi tors
i ndependence and performance, and
effecti veness of audi t process,
(c) Exami nati on of the fi nanci al statements
and the audi tors report thereon.
(d) Approval or any subsequent modi fi cati on
of transacti ons of the company wi th
rel ated parti es.
(e) Scruti ny of i nter-corporate l oans and
i nvestments.
(f) Val uati on of undertaki ng or assets of the
company wherever i t i s necessary.
(g) Eval uati on of i nternal fi nanci al control s
and ri sk management systems.
(h) Moni tori ng the end use of funds rai sed
through publ i c offers and rel ated
matters.
The Audi t Commi ttee shal l have authori ty to
i nvesti gate i nto any matter i n rel ati on to the
i tems (i ) to (vi i i ) above or referred to i t by
the Board and for thi s purpose shal l have
power to obtai n professi onal advi ce from
external sources and have ful l access to
i nformati on contai ned i n the records of the
company,
The Audi t Commi ttee may cal l for the
comments of the audi tors about i nternal
control systems, the scope of audi t, i ncl udi ng
the observati ons of the audi tors and revi ew
fi nanci al statements before thei r submi ssi on
to the Board
The audi t commi ttee
shoul d-
1. have di scussi ons
wi th the audi tors
peri odi cal l y
about:
I nternal control
systems,
the scope of
audi t i ncl udi ng
the observati ons
of the audi tors
and
2. Revi ew the hal f
yearl y and annual
F.S. before
submi ssi on to the
Board and
3. Al so ensure
compl i ance of
i nternal control
systems.
The Audi t Commi ttee
shal l have authori ty to
i nvesti gate i nto any
matter i n rel ati on to
the i tems speci fi ed or
referred to i t by the
Board and for thi s
purpose, shal l have ful l
access to i nformati on
contai ned i n the
records of the company
and external
professi onal advi ce, i f
necessary.
Who shall have
right to attend
meetings of audit
committee besides
its members?
Audi tors of a company and the key manageri al
personnel shal l have a ri ght to attend the
meeti ngs of the Audi t commi ttee when i t
consi ders the audi tors report but shal l not have
the ri ght to vote
Audi tor s, the i nter nal
audi tor , i f any, and the
di r ector - i nchar ge of
fi nance shal l attend and
par ti ci pate at meeti ngs of
the Audi t Commi ttee but
shal l not have the r i ght to
vote

Attendance at
annual general
meetings by
Chairman of Audit
Committee
Not obl i gatory under the 2013 Act The chai rman of the
Audi t Commi ttee shal l
attend the annual general
meeti ngs of the company
to provi de any
cl ari fi cati on on matters
rel ati ng to audi t

AUDITORS LIABILITIES
Punishment
of auditors
for
contraventio
ns
Secti on 147 of the 2013 Act bri ngs about a sea change i n
audi tors cri mi nal l i abi l i ty for contraventi on of the contents of
audi t report (secti on 143 of the 2013 Act), renderi ng of
prohi bi ted non-audi t servi ces to audi tee company (secti on
144 of the 2013 Act) and si gni ng of audi t report (secti on 145 of
the 2013 Act).
Secti on 147 provi des for mi ni mum fi ne of Rs. 25,000 and
maxi mum fi ne of Rs. 5,00,000. I f contraventi on i s wi l l ful or
knowi ngl y wi th i ntent to decei ve the company or i t
sharehol ders or credi tors or tax authori ti es, secti on 147
provi des for i mpri sonment of the audi tor up to one year and
mi ni mum fi ne of Rs. 1,00,000 and maxi mum fi ne of Rs.
25,00,000.
Further, Sec. 147 requi res the convi cted audi tor to refund
remunerati on to the company and pay damages to the company,
statutory bodi es or authori ti es or mi sl eadi ng statements of
parti cul ars made i n hi s audi t report. Such provi si ons were not
there i n 1956 Act.
The Central Government shal l , by noti fi cati on, speci fy any
statutory body or authori ty or an offi cer for ensuri ng prompt
payment of damages to the company or the persons speci fi ed
above. Such body, authori ty or offi cer shal l after payment of
damages to such company or persons fi l e a report wi th Central
Government i n respect of maki ng such damages i n such manner
as may be speci fi ed i n the sai d noti fi cati on.
Where the audi tor of a company i s an audi t fi rm and i t i s proved
that the audi t partner or partners has or have:-
Acted i n a fraudul ent manner or
Abetted or col l uded i n any fraud by or i n rel ati on to or by the
company or i ts di rectors or offi cers,
the l i abi l i ty whether ci vi l or cri mi nal as provi ded i n the Act or
any other l aw for such an act woul d be of the audi t partner or
partners concerned as wel l as of the fi rm joi ntl y and several l y.
Pal try fi ne
up to Rs.
10,000 i n the
event of
wi l l ful
noncompl i an
ce by audi tor
wi th secti on
227 (Powers
and duti es of
audi tors) or
secti on 229
(si gnature of
audi t report
etc.
--------------------

Amendment Notes For Auditing

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COMPANIES ACT 1956 vs.

COMPANIES ACT 2013 for CA IPCC & Final Auditing

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