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Unit 14: Audit of a Partnership Accounts and Government Company

succeeding 31st March and the subsequent Financial Years should also end on 31st March Notes
every year. The definition of Financial Year may be modified to indicate that the duration of
the first Financial Year should be minimum three months instead of the six months proposed
in the Concept Paper (2004). It was also suggested that the present provisions regarding laying
down of the accounts before the shareholders within six months of the end of the Financial
Year should continue.

Self Assessment

Fill in the blanks:

5. Audit of consolidated financial statements, if the audit partner is responsible for key
decisions or judgments on significant matters with respect to the consolidated financial
statements, that individual would be considered to be..........................
6. Auditor should carefully study the clauses of the deed regarding the salary of partners,
interest on the capital, and interest on ............................
7. The auditor of a Government Company shall be appointed or reappointed by the Central
Government on the advice of the ........................................

8. The Companies’ Amendment Act .................... has enlarged the concept of Government
Company for the purposes of audit.
9. Section 620 has been amended by the Companies’ Amendment Act, 1977 to permit the
period of ..................... to be completed in one session or in two or more successive sessions.

14.2.3 Directors’ Responsibility Statement

The Committee noted that the Companies Act was amended by inserting section 217 (2AA) by
the Companies (Amendment) Act, 2000, which has brought about inclusion of Directors’
Responsibility Statement in the report of the Board of Directors. The Committee was of the view
that in addition to the existing requirements, the Responsibility Statement should include that
the related party transactions and have been entered into at arm’s length, and if not, the
relationships of the directors in such transactions along with the amounts involved have been
disclosed as a part of the Director’s Report along with management justification thereof. The
existing requirement in Section 217 (2AA) requiring a Director Responsibility statement indicating
that the Directors have taken proper and sufficient care for the maintenance of adequate
accounting records in accordance with the provisions of the Act and that the books of accounts
comply with the accounting standards and policies should continue.
Law needs to recognize a modified approach for providing depreciation to the assets coming
under the category of infrastructure assets. In fact, in some countries, law has recognized that
there cannot be a statutory limit on the useful life of a capital asset. Expenditure incurred/to be
incurred to maintain the operating capabilities of such eligible assets could be charged off
towards permissible depreciation. The Company Law should provide a framework that
recognizes rates of depreciation for infrastructure projects where such rates are prescribed by
statutory regulator for concerned sector. In all other cases, rates of depreciation may be provided
taking into account the special requirements of infrastructure sector, as applicable to a class of
projects, under the Company Law.

14.2.4 Appointment of Auditors

The issue of appointment of First Auditor of the company and his subsequent appointments
were discussed at length. The Committee acknowledged the role of the Audit Committee

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