The Companies Amendment Bill now pending before parliament will reform the provisions relating to accounting/auditing standards. The highlights are:
Public companies with paid up share capital of over Rs30 million ($654,000) must appoint a chief accounts officer (CAO), responsible for maintaining books of account, ensuring disclosures under the Companies Act, 1956 and preparing its annual accounts.
Annual accounts must state derivatives, options and shares with different voting rights. These will be categorized as quasi-equity and must disclose the predominant character of, and voting rights embedded in, the security.
The board must disclose information and particulars regarding the operations, market conditions and prospects of each of its divisions and business segments with any share of over 10% of the total turnover of the company.
Holding companies are granted the option of preparing consolidated accounts of their financial statements for themselves and their subsidiaries.
Holding companies are exempt from providing documents relating to their subsidiaries in their balance sheets but are required to give a true and fair view of the state of affairs and should also disclose FOB and CIF value of exports and imports.
Public companies with paid up capital of over Rs50 million ($1.09 million) must set up audit committees consisting of at least two independent directors who should exercise powers and perform functions as prescribed under the Act. Existing audit committees must be reconstituted within a year from the enactment of the Bill.
Additional grounds have been added for the disqualification of auditors linked to their financial interests, business relationships and past employment in the company.
Auditors are precluded from providing the following services: bookkeeping, accounting, financial services, internal audit, actuarial services, valuation, recruitment and broking/investment advisory services. These limits apply both to services to the holding company and its subsidiary.