ENHANCING AUDIT QUALITY
The BCAS organised a virtual lecture by CA P.R. Ramesh on ‘Enhancing audit quality & enhanced reporting obligations’. It was planned keeping in mind the changes in the Companies Act, 2013 on audit quality and reporting norms.
The Managing Committee, along with the Accounting and Audit Committee, organised the event on 14th July. Vice-President CA Mihir Sheth welcomed the gathering and introduced the speaker.
Mr. Ramesh took participants through the current environment of audit, audit quality expectations, new CARO amendments and their reporting and other emerging reporting obligations like integrated reporting and ESG reporting.
He explained the current environment with various quotes and media displays; he touched on the complexities in the business transactions of today; the biggest failures across the globe and the big corporate failures. He also covered the current concerns such as poor corporate governance, lack of ethical behaviour, credibility of oversight and enforcement actions, failures due to shoddy accounting and auditing, and auditors missing glaring signs of failure.
Covering audit quality aspects, he stated that the statutory audit is the sixth line of defence, the first five being higher level management, functional and process managers, risk management and compliance functions, internal audit, and board and other committees. The basic building blocks of good audit quality were various structural, environmental and output factors, oversight and evaluation and execution issues. He laid special emphasis on audit procedures, the tools and techniques used and evaluation of audit results.
He also discussed the importance of communication to those charged with governance about routine, special and other matters, including auditor’s independence, communications; form, type and format of audit report and its qualitative and quantitative factors; management letter and group audits.
Mr. Ramesh then took up the history of the evolution of CARO, the key considerations and audit procedures in relation to the recent changes in CARO such as:
* reporting on proceedings initiated or pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder;
* reporting on whether at any point of time during the year the company has been sanctioned working capital limits in excess of Rs. 5 crores in aggregate from banks or financial institutions on the basis of security of current assets; and also whether the quarterly returns or statements filed by the company with such banks or financial institutions are in agreement with the books of accounts of the company;
* reporting on whether during the year the company has made investments in, provided any guarantee or security, or granted any loans or advances in the nature of loans, secured or unsecured, to companies, firms, LLPs or any other parties;
* details of investments, any guarantee or security or advances or loans not prejudicial to the company’s interest;
* whether any transactions not recorded in the books of accounts have been surrendered or disclosed as income during the year in the tax assessments under the Income-tax Act, 1961 (43 of 1961), and if so, whether the previously unrecorded income has been properly recorded in the books of accounts during the year [Clause 3(viii)];
* whether term loans were applied for the purpose for which they were obtained; if not, the amount of loan so diverted and the purpose for which it was used may be reported;
* whether funds raised on short-term basis have been utilised for long-term purposes; if yes, the nature and amount to be indicated;
* whether any fraud by the company or any fraud on the company has been noticed or reported during the year; if yes, the nature and the amount involved is to be indicated;
* whether the auditor has considered whistle-blower complaints, if any, received during the year by the company;
* existence of any material uncertainty on the date of the audit report and various other clauses.
The amendment to Schedule III of the Companies Act, 2013 and Amendments to the Companies (Accounts) Rules, 2014 were also covered.
Mr. Ramesh took up topics related to Integrated Reporting which is a concise communication about how an organisation’s strategy, governance, performance and prospects in the context of its external environment lead to value creation over the short, medium and long terms. He pointed out that on 25th March, 2021, SEBI decided to make the Business Responsibility and Sustainability Report applicable to the top 1,000 listed entities (by market capitalisation) for reporting on a voluntary basis for F.Y. 2021-22 and on a mandatory basis from F.Y. 2022-23.
He answered all the questions raised by the participants on the chat and Q&A box.
The key takeaways from the session were:
• Increased disclosures in financial statements with respect to clauses contained in CARO 2020 with the aim of increased compliance for the matters contained therein;
• Increased role of the CFO with the focus on compliances with certain laws and regulations, sanity of financial information furnished to banks, and to take note of adverse financial positions and corrective measures;
• Increased data-sharing with auditors and coordination required for concluding prior to sign-off;
• The overall quality of reporting by the auditors expected to increase on the financial statements of the company and thereby lead to greater transparency;
• Responsibility on the management for additional disclosures in the financial statements on various aspects relating to financial discipline, ageing, end-use of funds, etc.
The vote of thanks was proposed by CA Chirag Doshi. A large number of participants attended the online meeting. Its archival video has, in a short time, garnered a few thousand views.
A video of the same is available on YouTube at link: https://www.youtube.com/watch?v=gAbYUI8hOgs
Introducing a new feature, the BCAJ invites readers to scan the following QR Code that will help them to download the meeting and glean the knowledge shared by speaker P.R. Ramesh.
A MOVIE WITH TWISTS AND TURNS
The Human Resources Development Study Circle organised the screening of a film, ‘Ek Cheez Milegi Wonderful’, on the online platform on 25th July. The screening was sponsored by CA Vijay Mehta.
It was like family time for members as they watched it in the comfort of their homes. The three valuable hours that they spent on the movie helped bring home the message that in order to live better lives, it is best to make each other more comfortable and happy within the home. This was one of the lessons that was conveyed by the movie which was appreciated by the viewers.
The movie ‘Ek Cheez Milegi Wonderful’, offered both inspiration and motivation. In a world that craves and celebrates material things in lieu of happiness, the movie leads viewers to the actual meaning and essence of being happy. It reveals how ‘knowledge’ is a unique, unparalleled characteristic of the entire bio-world. It poses the question, what differentiates us humans from the rest of the living beings? Are we really higher than all of them on the pyramid of the living world?
Like any typical film, the movie features several twists and turns that keep the viewers focused till the very end when all the characters in it agree to the ‘universal truth’.
A must-watch movie, it is available on YouTube at the link https://youtu.be/lJNSpKWHwcg.
CHANGES IN COMPANY LAW & AUDITING
The Students’ Forum under the auspices of the HRD Committee organised a training session for CA Article Students on ‘Changes in Company Law & Auditing’ via Zoom Meetings on 26th July.
The Study Circle was led by CA Shraddha Kishnadwala, an expert on the subject.
CA Dnyanesh Patade, the co-ordinator, introduced the speaker and spoke about the various activities and events conducted by the BCAS Students’ Forum and encouraged the participants to take active part in its events.
Shraddha Kishnadwala then described the various changes in the Company Law in a lucid manner. She also explained the audit and verification procedures that can be followed and their impact on reporting.
The session was divided into three parts, viz., (a) Changes in Schedule III reporting, (b) Other major changes in the Companies Act, and (c) Auditing Procedure and Changes in CARO. The speaker pointed out that the Companies’ Amendment Act had bought about many changes in reporting, format and compliance.
The programme ended with CA Dnyanesh Patade, member of the HRD Committee, proposing the vote of thanks. About 160 students participated in the interactive session and they offered a positive feedback.
The session can be viewed on the BCAS YouTube Channel at: https://www.youtube.com/watch?v=Tt76E_C8Alc
TAXATION OF INDIVIDUALS
The Direct Tax Laws Study Circle Meeting on ‘Taxation of Individuals (Including Expats) with Special Emphasis on Taxing Accretion to Employer’s PF Contribution’ was held on 30th July.
Group leader CA Deepashree Shetty gave an overview of the residency criteria applicable for individuals and the tax relief measures available on account of Covid-19. She also discussed the key consideration for tax residency and taxation of the salary income of individuals (including expats).
Thereafter, she spoke on the tax implication of social security contributions (including that for expats). She also threw light on the impact of the newly-inserted Rule 3B and took the participants through the mode for computation of taxable amount and the practical challenges in computation under Rule 3B. The session ended with Deepashree discussing the provisions related to international work (i.e., expats) and the benefits of social security agreements.
FCRA AND RECENT AMENDMENTS
The FEMA Study Circle of the BCAS and the Financial Management Service Foundation (Delhi) came together for a discussion on ‘FCRA and Recent Amendments’. The meeting was led by Dr. Manoj Fogla, Dr. Sanjay Patra, CA Suresh Kejriwal and Mr. Sandeep Sharma. It was held on 31st July.
The session started with an introduction of the Foreign Contribution Regulation Act, 2010 (FCRA), followed by an in-depth analysis of its key provisions and the recent amendments. The speakers focused on details of the FCRA provisions and addressed the queries raised by the participants. The presentation was followed by a Q&A session.
The speakers pointed out that the recent amendments in FCRA have helped the authorities regulate the flow of funds received from foreign sources. However, this has also drastically changed the manner in which projects are executed by charitable institutions. This had created a lot of anxiety amongst them as well as the professionals advising them. It was no surprise that there were more than 1,300 registrations for the event with participation from charitable institutions and professionals alike.
