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Unit 2: Auditing Practices

a year, but it should not exceed 15 months. With special permission of the Registrar, however, Notes
this period may be extended to 18 months.
The audited financial statements, together with a report by the Board of Directors, must be sent
to shareholders and trustees for debenture holders at least 21 days before the date of the annual
general meeting. Quoted companies can no longer send an abridged set of accounts to the
shareholders and trustees for debentures holders, according to a circular dated September 23,
1994 issued by the Securities and Exchange Board of Indian. This circular was issued to the stock
exchanges to modify all listing agreements. Quoted companies are also required by their listing
agreement to furnish the stock exchange with unaudited financial results and required details
on a half-yearly basis within two months of the expiration of the period and also to advertise
such details in at least one national-language and one English daily newspaper. Publication of
the unaudited results for the second half-year is not obligatory if the company informs the stock
exchange that it will publish audited results within three months of the closure of the accounting
year. If the total of the two half years’ unaudited results with respect to any items in the prescribed
form varies by 20 percent or more when compared with the audited accounts for the full year, a
listed company must explain the reasons to the stock exchange.
In addition to accounts showing its position as a separate entity, a company that has subsidiaries
must submit for each subsidiary the financial statements, the board’s report and the auditor’s
report, all of which must be prepared in accordance with the requirements of the Act. A statement
must be attached that shows the extent of the holding company’s interest in each subsidiary at the
end of the subsidiary’s financial year and the profits and losses not dealt with in the holding
company’s accounts. The time lag between the balance sheet dates of the holding company and of
the subsidiaries should not exceed six months. When the financial years of the subsidiary and its
holding company do not coincide, the following information must be shown for each subsidiary.

1. Whether during the interval there has been any change in the holding company’s interest
in the subsidiary and, if so, the extent thereof.
2. Details of any material change occurring during the same period in fixed assets,
investments, and loans given or taken by the subsidiary. All listed companies whose
financial year ends in March 1996 or thereafter will be required to, as per the amended
listing agreements, give a cash flow statement along with the balance sheet and profit and
loss account. Such a statement is to be prepared in accordance with the requirements
prescribed by the Securities Exchange Board of India and duly certified by the statuette
auditors.

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Caution There is no need to prepare group accounts.
After the accounts have been laid before the company at the annual general meeting, three
copies of these accounts, together with all the documents that are required to be attached thereto
e.g. auditor’s report, Board’s report-must be filed with the Registrar of Companies within 30
days from the date of the annual general meeting. Under the tax laws a uniform accounting year,
April 1 to March 31, is to be followed. However, the Companies Act does not stipulate any such
uniform accounting year. As a result, companies having financial statements closing on a date
other than March 31 are required to get their accounts audited for the year ended March 31 for tax
purposes as well.

2.2.4 Appointment of Auditors

The Companies Act requires that only Chartered Accountants within the meaning of the Chartered
Accountants Act, 1949 can qualify for appointment as auditors. The first auditor of a company is

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