Compliance Check At The Time of Statutory Audit

INTRODUCTION:

After the commencement of the Companies Act, 2013, the exemptions which were earlier available to unlisted companies under the Companies Act, 1956 has been withdrawn in the new act and after so many amendments and modifications, the companies now needs to comply with all the provisions of the Companies Act, 2013, wherever applicable. Where the burden of compliances comes to companies, Statutory Auditors has already geared up with their compliance check tools to make the companies compliant with every provision of the Companies Act, 2013.

Here, the purpose of carrying out an audit is to check the ways in which a company spends the shareholders’ money and earns profits for the shareholders. The audits also see to it that the methods used for spending such money is in accordance with the laws and policies actively implemented for such use. It is factors such as these that make statutory audits so important.

CHECKLIST FOR ROC RELATED COMPLIANCES WHICH ARE REQUIRED TO BE CHECKED BY THE STATUTORY AUDITORS OF AN UNLISTED COMPANY:—

♦ Compliance related to filing of the resolution for Disclosure of Interest in form MGT 14 (For Private companies, filing of form MGT 14 is not mandatory).
♦ Compliance related to Form DIR 3 KYC and to check whether DIN of all the directors has not been disabled due to non-filing of Form DIR 3 KYC with ROC.
♦ Compliance related to section 164 of the Companies Act, 2013, by checking disqualified status of each director in the company. 7/30/2021 2/3
♦ Compliance related to Section 203 and Rule 8 (Appointment of Key Managerial Personnel) of the Companies Act, 2013, whether companies has complied with the provision or not (Every listed company and every other public company having a paid-up share capital of ten crore rupees or more shall have whole-time key managerial personnel).
♦ Compliance related to Section 73 and Rules prescribed under Companies Act, 2013, whether company has reported Loans, Security deposits and other deposits and non-deposits in form DPT 3 and whether all the necessary steps has been taken by the company as per the provisions.
♦ Compliance related to section 188 of the Companies Act, 2013, whether related party transactions has been made by the company during the year, if yes then whether they have complied with the provisions.
♦ Compliance related to MSME Form filing, whether company has reported details of Invoices whose payment was made after 45 days or Invoices which were outstanding at the end of reporting period in form MSME 1 (half yearly return which company needs to file).
♦ Compliance related to Form BEN 2, whether the same form has been filed by the company if there was a change in the position of a significant beneficial owner.
♦ Compliance related to Declaration from the Directors, whether Declaration has been obtained from the Directors and their relatives, in case of any loan received by the company from them.
♦ Compliance related to the Loans from shareholders, whether company has complied with the applicable provisions of the Companies Act, 2013 while receiving Loans from its shareholders.
♦ Compliance related to Section 185 of the Companies Act, 2013, whether company has granted any loans to its directors or any person in whom any of the director of the company is interested, if yes then whether the company have passed the necessary resolutions (Check the conditions which were prescribed for getting exemptions under this section for private companies).
♦ Compliance related to Section 180(1)(C) of the Companies Act, 2013, whether company have passed the necessary resolutions under the same provisions while borrowings has been made by the company.
♦ Compliance related to Section 186 of the Companies Act, 2013, whether company have passed the necessary resolutions while granting any loans, investments or Guarantee.
♦ Compliance related to Sections 77 to 87, whether company took any financial assistance from Banks and Financial Institutions if yes then whether charge has been created or modified or satisfied with respect to the provisions of the act.
♦ Compliance related to the provisions of Cost Audit appointment and Audit, whether company has complied with the provisions of the Cost Audit which includes filing of form CRA-2(if applicable).
♦ Compliance related to the provisions of Appointment of Internal Auditor, whether company has complied with the provisions of the same (if applicable).
♦ Compliance related to the provisions of Private Placement, Right Issue, Bonus Issue & ESOP, if company has issued shares to Investors.
♦ Compliance related to the Section 56 of the Companies Act, 2013, whether company has accepted any share transfer requests from the shareholders if yes then whether company has complied with provisions or not.
♦ Check all the details related to the Holding, Subsidiaries & Associate Concerns of the company wherever applicable.

CONCLUSION:

There are so many Compliances & legal requirements required under Companies Act, 2013 which need to be checked & verified by the Audit team while conducting the Statutory Audit of an unlisted company. While companies are required to comply with the requirements of the Companies Act, 2013 and continue to be primarily responsible for the same, the auditors of the company have a duty to verify and check whether the company is fulfilling the requirements as prescribed under the Act and if not then to raise a red flag in their audit report.