The Companies Act An Indian case study Example For Students

The Companies Act: An Indian case study The Companies Act ( 1956 ) provides the basic demands associating to fiscal coverage of all companies incorporated in India. The Companies Act requires the readying, presentation. Publication and revelation of fiscal statements: and an audit of all companies by a member-in-practice certified by the Institute of Chartered Accountants of India ( ICAI ) . Section 211 ( Part 1, Schedule VI ) to the Act prescribe the signifier, contents, and minimal revelation demands of fiscal statements. The two chief pieces of statute law regulating the securities market in INDIA: Clause 41 of Stock Exchange Listing Agreements requires all listed companies to print one-year audited fiscal statements. Listed companies in India are required to follow with, Securities and Exchange Board of India ( SEBI ) Act of 1992, demands as defined even in the Securities Contracts ( Regulation Act 1956. The Companies Act 1956 specifies the audit of one-year histories of a company is mandatory and indispensable portion of an integrated concern. Section 226 of the Act provides for the making and disqualification of hearers that lone persons possessing the needed cognition and accomplishment can be appointed as hearers and they should be independent in transporting out their work to give an indifferent sentiment based on nonsubjective appraisal of facts. Thus the hearer should hold no involvement fiscal and otherwise whether straight and indirectly, in the company and/or in its direction. Section 224 ( 1 ) of the Act seeks to guarantee that the assignment of the hearers is non in the custodies of managers instead vested in general organic structure of stockholders. The Chartered Accountant Act ( 1949 ) governs the accounting profession in India: The Chartered Accountant Act, 1949 ( Act No. XXXVIII of 1949 ) states the followers: Formation of Quality Review Board: Section 28A, the board would be an independent organic structure mandated to repair the criterions for audit services, guide members to better the quality of services, and reexamine the quality of services provided by the hearers. Outline1 Revision of disciplinary action process against ICAI member.2 Addition in the proportion of Government representation on the ICAI council.3 Australia:4 Bharat:5 Corporation Act 2001- Sec 307A6 The Ethical Scenario: Conformity with Auditing Standards7 Reconciliation of the above Indian Standards:8 Differential Comparison:9 Comparison of Similarities: Revision of disciplinary action process against ICAI member. Addition in the proportion of Government representation on the ICAI council. Directors and direction of company are required to guarantee conformity with commissariats of the Companies Act ( 1956 ) . Besides, a company`s hearer has an duty to convey to the attending of the stockholders any disobedience with commissariats of the Act with regard to the fiscal coverage and associated legal facet. Therefore, ( a ) proficient competency, ( B ) professional independency play a important function in dispatching responsibilities in pattern to attest what he does non believe to be true and take sensible attention and accomplishment before he believes that what he attest to be true. Structural and Regulative Comparison: Periodic coverage demands vary significantly. ASX has a comprehensive periodic coverage model in add-on to uninterrupted revelation. All companies must supply full twelvemonth histories in add-on to half annual studies. Australia: Section 227B of the Corporate Law Economic Reform Program ( Audit Reform and Corporate Disclosure ) Act 2004 establishes the Auditing and Assurance Standards Board ( AUASB ) as the independent statutory organic structure, which, under subdivision 227B of the Australian Securities and Investment Commission Act 2001, may explicate counsel on scrutinizing and confidence affairs. The revised and redrafted Australian Auditing Standards ( ASAs ) will utilize the tantamount ISAs as the underlying criterion and are expected to be operative for audit of fiscal studies with describing periods get downing on or after 1 January 2010. Bharat: The Auditing and Assurance Standards Board ( AASB ) of the ICAI recognizes the development of Auditing and Assurance Standards ( AAS ) on the footing of continual acceptance of ISAs. The AASB compares all AASs with current version of ISAs and examines any important differences. ( http: //web.ifac.org/isa-adoption/chart ) A landmark understanding between CPA Australia and ICAI highlights the progressively planetary nature of the accounting profession said President, CPA Australia, Alex Malley. ( MOU with CPA Australia acknowledging each others making ) ( www.caclubindia.com ) ASX Corporate Governance Council s indispensable corporate administration rules specify that a company should: Promote ethical and responsible determination devising Safeguarding unity in fiscal coverage Making seasonably and balanced revelation and ; moreover The regulative mechanism turn toing corporate administration in Australia has emphasized accountability and transparency through required revelations particularly to stockholders. Commissariats of Corporations Act 2001 and ordinances address audit quality as that how good an audit detects and studies stuff misstatements in fiscal statements. Mukherjee, ( 2007 p,24 ) states that Indian GAAP ( Generally Accepted Accounting Principles ) , will fall in line with International Financial Reporting System ( IFRS ) by 2009 as an Ernst A ; Young India Survey showed that 95 % of CFOs of the companies wanted India to follow planetary accounting criterions. The study farther reflects that 64 % favoured IFRS and 31 % supported US GAAP. AUASB releases charter, in September 2009: The AUASB has released three exposure bill of exchanges ( ED ) of Australian Auditing Standards in Clarity format. They are: Vegetarianism - To Meat Or Not To Meat EssayAPES 110 and amendments to this Code conform to the Code of Ethics for Professional Accountants Section 290 ( Revised ) issued by International Ethics Standard Board for Accountants ( IESBA ) in July 2006. The hearer independency demands in APES 110 are aligned with the Australian Corporations Act. Difference between APES 110 and the IFAC Code: Section 290 in APES 110 by and large refers to Audit Clients whereas the IFAC codification refers to Financial Statements Audit Clients. Section320.2 of APES 110 to boot provinces that a member in concern should guarantee conformity with professional criterions. Differential Comparison: Therefore, independency in India is impaired: If any relation of the member is deemed to hold a significant involvement in the concern As a consequence of loans to or from clients. And ; Australian codification provinces members may keep portions in a private company or be a member of a house transporting on a commercial project if these are simply investings ; provided the member does nt well take part in the active direction of the house. And, furthermore Australian codification only provinces to transport out the work in conformity with the proficient and professional criterions relevant to the work. Comparison of Similarities: Even in the face of disparate economic, political, societal, legal and cultural environments between these two states, there is some grade of convergence in the ways different professional accounting organisations define their regulations of behavior. A certain grade of unanimity is detected in the comparing of codifications, but certain ethical regulations are of import and should be of concern irrespective of national application. Such unanimity tends to follow some common ethical parametric quantities and rules. Rules related to independency, unity, struggles of involvement are few illustrations of cosmopolitan applications irrespective of nationalities. Revising the ICAI Code of Ethics, to convey in line with the IFAC codification of Professional Ethical motives: Some limitations prescribed under the current ICAI codification of moralss need immediate alteration in order to increase the fight of Indian Audited account Firms. The Naresh Chandra Committee has made several recommendations in this respect that should be legislated. Several regulations defined by ICAI appear more rigorous than those defined by IFAC. Cultural Influences: In the codifications of professional behavior two facets of audit independency are recognized by and large Independence in fact which set up the importance of fiscal, concern or household relationships that may impact auditor-client dealingss. Independence in visual aspect or perceptual experience is more a affair of mental attitude and potentially influenced by cultural background. The above survey recognizes that Australia placeholders for the Anglo-American bunch ( UK, US, Canada ) and India placeholder for the Asiatic Indian bunchs. But, both are members of the British Commonwealth theoretical account of accounting, inherited from UK, corporate statute law and accounting patterns where true and just position and exercising of professional judgement are as of import. The construct of an person as a separate individual to make up ones mind and distinguish the ethical and unethical is by and large absent among bulk driven Indians, whereas Australians ( Anglo American Cluster ) topographic point more importance to individuality and independency. In the context of auditor-client relationship the client is regarded as more powerful party because of the option of exchanging hearers. Because of cultural apparatus of keeping harmonious interpersonal dealingss Indian Accountants are more likely to submit to clients. The 2nd ground as compared to Australia people i n India are influenced in their ain opinion and appraisal of others opinion. The responses to the questionnaire to big-six houses in India and Australia in which Indian faculty members regarded importance of ; ( I ) holding good working relationships with higher-ups, ( two ) responsibility, earnestness and dedication at work and ( three ) turning away of struggle and care of hierarchal equilibrium and harmoniousness. And, Australian faculty members professed the importance of development of an individualistic competent ego and endeavoring for power equalization. Thus the Australian comptrollers are less likely to submit to clients than the Indian comptrollers. Therefore, four points distinguishing Australian Accountants from Indians associating to the rating of hearer s behavior are: Fair/unfair, 2. Just/unjust, 3. Acceptable/unacceptable to household, 4. Culturally acceptable/unacceptable. The first three points differentiate on the footing of rating of determination in footings of built-in equity and justness. The last being a constituent of comparative ethical opinion influenced by cultural backgrounds. Indian Audited account: Elusive Independence: Satyam scam an event of Horrifying Magnitude . On January 12, 2009 elected representatives of comptrollers and hearers debated the cozenage and PriceWaterhouseCoopers s function in it. The demand is for greater independency from the companies they audit. The inquiry is How can the statutory hearers be independent if they are paid by the company they are supposed to scrutinize? The fees can act upon the study card, it is the concluding unit of ammunition of treatments within the direction where corners are cut and the histories are window dressed. Independent managers on the Satyam board were non truly independent and that hearers frequently acted in collusion with corrupt company directors. Furthermore, the histories had been audited by internationally reputed house PWCs.