Page 24 - DCOM204_AUDITING_THEORY

Auditing Theory

Notes 2. All sales and purchases of goods made by the company.

3. The assets and liabilities of the company.

!
Caution A company that belongs to a class of companies engaged in production, processing,
manufacturing, or mining activities also must maintain such details of utilization of
material, labor and other items of cost as may be prescribed by the Central Government
for that class.
There is no provision in the Companies Act as to the form in which the books of account are to
be maintained, but it is incumbent on a company to maintain such books on an accrual basis.
Such books and vouchers as are relevant to any entry in the books of account must be maintained
for a period of at least eight years after the end of any financial year.
The books of account must be kept at the company’s registered office. In the case of a company
with a branch office, the books of account relating to the branch transactions may be kept at the
branch office. If the Board of Directors decides to keep the books at a place other than the
registered office, it must inform the Registrar of Companies within seven days of its decision
and given the address of the place where the books are located.
The books of account and other books and papers are open to inspection by any director the
Registrar of Companies or authorized government officials during business hours. Except in the
case of a winding-up of a company, the shareholders have no right to inspect the books of
account.
In addition to the books of account mentioned above, a company is required to keep various
registers, e.g., an investment (securities) register, a register of shareholders, a separate register
of directors and their share holdings, and minute books of shareholders’ and directors’ meetings.

Notes The shareholders have the right of access to most of these registers, which must be
kept at the registered office of the company.

Task On the basis of accounting standards make a checklist of various books of accounts
that company need to maintain for compliance and auditing purpose.

2.2.3 Audited Financial Statements

At every annual general meeting of a company, the Board of Directors must lay before the
shareholders financial statements consisting of a balance sheet and a profit and loss account
(income statement). These financial statements must be accompanies by the auditor’s report and
the report of the company’s Board of Directors. The auditor is required to report on a long list of
matters prescribed either in the Companies Act or in the orders issued under the Act and on any
deviation from the mandatory accounting standards issued by the Institute of Chartered
Accountants of India (ICAI).
The period covered by the income statement should not end on a date that is more than six
months before the date of the annual general meeting unless the date of the general meeting is
extended by the Registrar of Companies. However, in the case of the first annual general meeting,
the gap between the two dates may be none months. The financial year may be less or more than

18 LOVELY PROFESSIONAL UNIVERSITY