Regulating & Compliance Requirement

The Companies Act, 2013

The Companies Act, 2013 has two very important Sections - Section 134 and Section 143, which have a direct impact on the audit and accounting profession.

Section 134

Section 134 of the Companies Act, 2013 on “Financial statement, Board’s report, etc.” states inter alias:

The Directors’ Responsibility Statement referred to in clause (c) of sub-section(3) shall state that:

The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
The Directors, in the case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

Section 143

Section 143, of the Companies Act 2013, on “Powers and duties of auditors and auditing standards” states inter alia:

Section 143(3) contains the Auditor’s Report which states:

“whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls”;

When we talk in terms of “adequacy and effectiveness of controls”; it refers to the adequacy of the control design and whether the control has been working effectively during the relevant financial year.

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