The Ministry of Corporate Affairs (MCA) has issued a slew of amendments to the provisions of the Companies Act, 2013 (2013 Act) effective for companies from 1 April 2021. The amendments, inter alia, require every company that uses an accounting software for maintaining its books of account to use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled. An auditor would also be required to state in its report as to whether the company has used such an accounting software with additional comments on the fact that the audit trail feature has not been tampered with and the audit trail has been preserved by the company as per the statutory requirements for record retention. Further, as part of the amendments to Schedule III to the 2013 Act, companies are also required to disclose details relating to crypto and virtual currency in the notes to the statement of profit and loss. The regulatory updates section of this edition of Accounting and Auditing Update (AAU) provides an overview of these and other regulatory and financial reporting developments in India.
Under the provisions of the Indian Accounting Standards (Ind AS), contingent liabilities are not recognised, rather such liabilities are disclosed as part of the notes to the financial statements. Recently, the Expert Advisory Committee (the committee) of the Institute of Chartered Accountants of India (ICAI) has issued an opinion which discusses a specific situation of disclosure of a contingent liability in the standalone financial statements of a parent company. In this case, a corporate guarantee has been issued by the parent company to a bank for furnishing performance bank guarantee on behalf of wholly owned subsidiary company towards its performance obligation. Our article on the topic summarises the analysis of the committee and related guidance issued in this regard.
The role of the independent directors is crucial in the overall framework of corporate governance. They are expected to bring a healthy balance between the interests of the promoters and other stakeholders including minority and small shareholders. Accordingly, stringent guidelines have been prescribed under the 2013 Act and the Securities and Exchange Board of India (SEBI) (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR) vis-à-vis the appointment, roles and responsibilities of independent directors. In order to further strengthen the independence attributes of independent directors and enhance their effectiveness in protection of the interest of the minority shareholders, and other functions, recently, SEBI has issued a consultation paper on review of regulatory provisions related to independent directors on the boards of listed companies. Through the consultation paper, SEBI has proposed various revisions to the regulatory provisions relating to independent directors under the LODR. It also seeks views on the need for review of remuneration of independent directors as prescribed under the 2013 Act and LODR. Our article aims to provide an overview of the proposals made by SEBI in its consultation paper.