Auditors to disclose specific info on corporate loan defaults
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Auditors might soon have to mention specific details about loan defaults by a company, including the amount and period, in their reports amid larger efforts being made to curb corporate misdoings.
The proposal from the Corporate Affairs Ministry, which is implementing the Companies Act, also comes at a time when bad loans are rising in the banking system.
In the draft Companies (Auditor's Report) Order, 2016, the Ministry has said an auditor in his or her report should mention about loan defaults by a company along with the amount.
According to the draft CARO, an auditor should mention "whether the company has defaulted in repayment of dues to a financial institution or bank or debenture holders?"
"If yes, the period and amount of default to be reported (in case of banks and financial institutions, lender wise details to be provided)".
Another proposal is that auditors should mention about "non-cash transactions" that a firm has entered into with its directors or persons connected with them and whether such deals are in compliance with provisions of the Companies Act.
In case, an auditor is unable to express any opinion on a specific matter related to the company, then the same should be explained.
Among others, auditors would have to mention whether a company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.
In September last year, the Ministry had set up a committee to examine and recommend matters for inclusion in the statement to be attached with auditor's report under the Companies Act, 2013 for the financial year 2015-16 onwards.
The Ministry has sought comments from the public on the draft CARO till February 23.
(Source - PTI, Business Standard)
The proposal from the Corporate Affairs Ministry, which is implementing the Companies Act, also comes at a time when bad loans are rising in the banking system.
In the draft Companies (Auditor's Report) Order, 2016, the Ministry has said an auditor in his or her report should mention about loan defaults by a company along with the amount.
According to the draft CARO, an auditor should mention "whether the company has defaulted in repayment of dues to a financial institution or bank or debenture holders?"
"If yes, the period and amount of default to be reported (in case of banks and financial institutions, lender wise details to be provided)".
Another proposal is that auditors should mention about "non-cash transactions" that a firm has entered into with its directors or persons connected with them and whether such deals are in compliance with provisions of the Companies Act.
In case, an auditor is unable to express any opinion on a specific matter related to the company, then the same should be explained.
Among others, auditors would have to mention whether a company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets.
In September last year, the Ministry had set up a committee to examine and recommend matters for inclusion in the statement to be attached with auditor's report under the Companies Act, 2013 for the financial year 2015-16 onwards.
The Ministry has sought comments from the public on the draft CARO till February 23.
(Source - PTI, Business Standard)
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