1. Compliance requirement under the Companies Act, 2013
Key takeaways:
Recent changes affecting the financial statements for the year ended 31st March 2019
Disclosures required in financial statements – other than those required by Schedule III
Reporting required in audit report – in addition to those required by section 143.
Applicability of CARO, Cash flows statement, IFC reporting and classification as SMC under the accounting standards.
UDIN is now mandatory for all audit reports w.e.f. 1st July 2019
Summary of reporting requirements as per new SAs.
Drafting of audit report – some peculiar considerations
Note: Focus mainly on requirements for unlisted entities and Non-Ind AS entities

2. Recent changes affecting the financial statements for the year ended 31st March 2019
The format for audit report is completely changed – consequent to revision in SA 700, SA 705 and SA 706.
Following are the changes in Division I of Schedule III to the Companies Act, 2013 (applicable to Non- Ind AS financial statements) – Notification dated 11th October 2018.
In the balance sheet – the words ‘Fixed Assets’ are now substituted by ‘Property, Plant and Equipment’
In the balance sheet – the words ‘Securities Premium Reserve’ are now substituted by ‘Securities Premium’
Other suggestions:
Mention of name and DIN of directors along with signature in the financial statements
Mention FRN and Mem No. of the signing partner along with signature in the financial statements, in addition to the auditor’s report.

3. Disclosures required in financial statements – other than those required by Schedule III
Section 73 – Acceptance of deposits 
Rule 16A of Companies (Acceptance of Deposits) Rules, 2014
(1) Every company, other than a private company, shall disclose in its financial statement, by way of notes, about the money received from directors.
(2) Every private company shall disclose in its financial statements, by way of notes, about the money received from the directors, or relatives of directors.

4. Disclosures required in financial statements – other than those required by Schedule III - continued
Section Political contributions
(3) Every company shall disclose in its profit and loss account any amount or amounts contributed by it to any political party during the financial year to which that account relates, giving particulars of the total amount contributed and the name of the party to which such amount has been contributed.
Section Contributions to national defence fund, etc. 
(2) Every company shall disclose in its profits and loss account the total amount or amounts contributed by it to the Fund referred to in sub-section (1) during the financial year to which the amount relates.

5. Disclosures required in financial statements – other than those required by Schedule III - continued
Section Loan and investment by company
(3) The company shall disclose to the members in the financial statement the full particulars of the loans given, investment made or guarantee given or security provided and the purpose for which the loan or guarantee or security is proposed to be utilised by the recipient of the loan or guarantee or security.

6. Reporting required in audit report – in addition to those required by section 143  
Section 197 – Remuneration to directors
(16) The auditor of the company shall, in his report under section 143, make a statement as to whether the remuneration paid by the company to its directors is in accordance with the provisions of this section, whether remuneration paid to any director is in excess of the limit laid down under this section and give such other details as may be prescribed.

7. Applicability of CARO, Cash flows statement, IFC reporting and classification as Small Company and SMC under the accounting standards  
Overlapping conditions
CARO – borrowings from banks and financial institutions
IFC – borrowings from banks, financial institutions and body corporates
SMC – borrowings, including public deposits
Current year or preceding year data
Small company and SMC – turnover data for preceding year
CARO – total revenue for current year

8. Applicability of CARO, Cash flows statement, IFC reporting and classification as Small Company and SMC under the accounting standards - continued  
Subtle differences in the conditions
Small company – turnover does not exceed Rs. 2 crores
SMC – turnover (excluding other income) does not exceed Rs. 50 crores
CARO – total revenue does not exceed Rs. 10 crores
Small company – paid up capital does not exceed Rs. 50 lakhs
CARO – paid up capital and reserves are not more than Rs. 1 crore

9. Applicability of CARO, Cash flows statement, IFC reporting and classification as Small Company and SMC under the accounting standards - continued  
Treatment for private company which is a subsidiary of public company
Proviso to section 2(71) - Provided that a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles
Need for appropriate tool/checklist to ensure that compliance 
Illustrative toolkit 

10. Mandatory UDIN for audit reports w.e.f. 1st July 2019
• UDIN to be generated on the date of issue of audit report. Extract from the mail received from ICAI:
“UDIN will not be generated after the signature dates of Audit Reports although a 15 days window is there for exceptional circumstances. Further as non-compliance of UDIN directive may attract Disciplinary Proceedings as per Clause 1 of Part II of Second Schedule of Chartered Accountant Act, 1949.”
• UDIN to be mentioned in the audit report (refer audit report template)
• Following parameters are mandatory for generation of UDIN:
Financial year
Gross turnover/gross receipts
Shareholders Fund / Owners Fund
Net Block of Property, Plant & Equipment
FRN (Firm Registration Number)

11. Summary of requirements of new Standards on Auditing on reporting
SAs impacting all audit reports
SA700 (Revised) Forming an Opinion and Reporting on Financial Statements
Now the audit report starts with an opinion
Description of the auditor’s responsibilities
SA720 (Revised) The Auditors Responsibilities Relating to Other Information in Documents containing Audited Financial Statements
Other information in the annual report: Directors’ Report (including annexures) and other statements (viz. Management Discussion and Analysis, Corporate Governance Report etc. for listed entities)
Three situations at time of adoption of accounts – all documents available, partly available or not available
Audit report must refer to such other information and auditor to provide comment, based on the prevailing situation.

12. Summary of requirements of new Standards on Auditing on reporting - Continued
Other SAs
SA701 Communicating Key Audit matters in the Independent Auditors report – presently applicable only to listed entities
Identification of Key Audit Matters (KAM) – mainly significant items, involving estimates, assumptions or judgements.
What is to be reported – KAMs identified, description of the matter, reasons for selection, how addressed in conducting the audit
SA705 (Revised) Modifications to the Opinion in the Independent Auditors Report
SA706 (Revised) Emphasis of Matter Paragraph and Other Matter Paragraph
   

13. Drafting of audit report – some peculiar considerations
In case the audit was conducted by another auditor in the immediately preceding year, the fact is required to be mentioned under the heading “Other Matters” as under:
 Other Matter
The financial statements of the Company for the year ended 31st March [●] were audited by another auditor who expressed an unmodified opinion on those statements on [mention the date of previous auditor’s report].
In case where the matter regarding ‘going concern’ is specifically mentioned in the financial statements and audit report, following reporting is required u/s 143(3) of the Companies Act, 2013 under the heading ‘Report on Other Legal and Regulatory Requirements’
(e) The going concern matter described under the Emphasis of Matter paragraph above, in our opinion, may have an adverse effect on the functioning of the Company.

14. Drafting of audit report – some peculiar considerations - continued
Applicability / Non-applicability of IFC reporting
Reporting under the Auditor’s responsibility para
Reporting under 143(3) – para on IFC to be added. Further, a specific mention in that para “Our/My report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls with reference to financial statements”
Need to prepare a detailed SOP and templates for audit report.
Need to prepare a comprehensive checklist for audit report.
Illustrative template and audit report checklist.

15. Book recommendation:
For softcopy of the toolkit and audit report template, please send your ID by mail to