ICAI-Announcement regarding Statutory Auditors Reporting Responsibilities - 25 January.

ANNOUNCEMENT

Statutory Auditor’s Reporting Responsibilities in Respect of Depositing of Cess Pursuant to Clause 4(ix)(a) of the Companies (Auditor’s Report) Order, 2003 and Section 227(3)(g) of the Companies Act, 1956

The Council of the Institute, at its 312th meeting held on December 25 - 27, 2011, noted that paragraph 4(ix)(a) of the Companies (Auditor’s Report) Order, 2003 required the statutory auditor to report on the matter relating to regularity of the company in depositing undisputed statutory dues as follows:

“Is the company regular in depositing undisputed statutory dues including Provident Fund, Investor

Education and Protection Fund, Employees’ State Insurance, Income-tax, Sales-tax, Wealth Tax,

Service Tax, Custom Duty, Excise Duty, Cess and any other statutory dues with the appropriate

authorities and if not, the extent of the arrears of outstanding statutory dues as at the last day of the

financial year concerned for a period of more than six months from the date they became payable, shallbe indicated by the auditor.[Paragraph 4(ix)(a)]”

2. The Council also noted that paragraph 63(g) of the Statement on the Companies  Auditor’s Report) Order, 2003, issued by the Institute of Chartered Accountants of India states as follows:

It may be noted that at present, no Rules relating to the amount of cess for rehabilitation or revival or protection of assets of sick industrial companies, payable by a company under section 441A of the Act have been notified by the Central

Government. Thus, it would not be possible for the auditor to comment on the regularity or otherwise about the cess till the time relevant rules or regulations are issued. However, till the time such Rules are prescribed, the auditor should also state in his report under this clause that the Government has not notified any Rules under section 441A of the Companies Act, 1956 and, therefore, the auditor is unable to comment on this particular issue. (emphasis added)

3. The Council noted that till date the Central Government had not notified the effective date of section 441A of the Companies Act, 1956. Consequently, no Rules thereunder had also been prescribed by the Central Government. Accordingly, there was no question of reporting thereon under the Companies (Auditor’s Report) Order, 2003. The Council, therefore, decided that in view of the aforementioned situation, the statuary auditor need not report in respect of cess payable under section 441A of the Companies Act, 1956 as envisaged under paragraph 63(g) of the Statement on the Companies (Auditor’s Report) Order, 2003. The Council, therefore, decided to modify paragraph 63(g) of the said Statement as follows:

“It may be noted that at present, no Rules relating to the amount of cess for rehabilitation or revival or protection of assets of sick industrial companies, payable by a company under section 441A of the Act have been notified by the Central Government. Thus, it would not be possible for the auditor to comment on the regularity or otherwise about the

cess till the time relevant rules or regulations are issued. However, till the time such Rules are prescribed, the auditor should also state in his report under this clause that the Government has not notified any Rules under section 441A of the Companies Act, 1956 and, therefore, the auditor is unable to comment on this particular issue. However, till the time such Rules are prescribed, the auditor need not make any comment in respect of the Cess under section 441AB of the Companies Act, 1956 in his report under paragraph 4(ix)(a) of CARO 2003.”

4. The Council, incidentally, also noted that section 227(3)(g) of the Companies Act,1956 required the statutory auditor’s report to state, 

 “Whether the cess payable under section 441A has been paid and if not, the details of amount of cess not so paid.”

It was also noted that the operative date of even section 227(3)(g) had not yet been notified by the Central Government.

5. Accordingly, as a corollary to the Council’s views on auditor’s reporting responsibilities on cess under section 441A of the Companies Act,1956, pursuant to clause 4(ix)(a) of CARO,2003, the Council was of the view that the statuary auditor’s report need not contain any comment on section 227(3)(g)

of the Companies Act,1956.