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Accounting & Audit Auditing & Assurance Standards (AAS)

  • XBRL for effective financial reporting
    Jul 04, 2011
    The Ministry of Corporate Affairs (MCA) decided on June 7, 2011 that all listed companies, including their Indian subsidiaries but excluding the overseas subsidiaries, companies having a paid up capital of more than Rs 5 crore or above, or turnover of Rs 100 crore or above are required to file their financial statements for the year 2010-11 onwards using XBRL – the ‘extensible business reporting language. In the first phase, banking, insurance, power, and non-banking financial companies (NBFC) are exempted. This is a landmark decision as far as change in the format of in financial reporting of companies is concerned which may affect approximately 90,000 companies in the first round. The MCA had sought the views of the corporates before issuing the final notification in July. XBRL is a open royalty-free, software developed through collaboration between accountants and technologists from all over the world, constituting XBRL International with more than 650 members. Based on XML, the language incorporates many accounting and analytical software tools and applications.
  • Where a CA must tread carefully
    May 02, 2011
    Financial statements attain sanctity when they are attested by an auditor. Auditors, in turn should exercise certain precautions before lending their names to the financial statements lest they are held liable for negligence. Certain heads are not capable of being cross-checked and the risk attached to such lines such as travelling, etc., is less than those of others where a cross-check can be made even by an outsider. Upon completion of substantive procedures, the auditor would do well to ponder over certain aspects. The following are some areas where caution is to be exercised Capital vs revenue: There are several case laws deciding whether a particular expenditure or income is to be treated as revenue or capital. Error of judgment results in distorting the true and fair view. The auditor should document the reasons for treating a particular expenditure as capital or as revenue.
  • Auditor alleges harassment by RCom, writes to DoT again
    Feb 08, 2011
    The government-appointed auditor Parakh & Co, which conducted a special audit on the books of Reliance Communications (RCom) has for the second time sought the government's help in what it calls being victimised for conducting its duty in a professional manner. The audit firm has written to the department of telecommunications alleging harassment at the hands of RCom and sought its intervention for rescuing its from the clutches of RCom. It has also sought DoT's advice whether it should tender the materials pertaining to audit to the anti-extortion cell of Mumbai police which is examining the case on a complaint by RCom. The firm had first written a similar letter on October 1, last year alleging that RCom was intimidating it and had been making false and baseless accusations against the auditor at various forum and authorities.
  • Concurrent audit to be a must for govt purchases
    Feb 07, 2011
    In an effort to avoid scams like those associated with 2G spectrum and Commonwealth Games, the government is planning to make concurrent audit mandatory for procurements by all departments. The move shows that the UPA establishment is acutely aware that it can no more withstand big corruption cases. Currently, only defence department purchases go through a rigorous ex-ante/concurrent audit while those by other wings of the central government are subject only to ex post facto checks including the statutory audit by the Comptroller and Auditor General. Government procurements at the central, state and local levels account for 25-30% of the country’s GDP, with the Centre accounting for bulk of this amount. The huge jump in revenue in recent years coupled with the expansionary fiscal stance that followed the global economic crisis has led to an over 60% increase in central government expenditure in the last five years to over Rs 11.
  • Auditing anti-fraud controls
    Jan 13, 2011
    Fraud in the Citibank's Gurgaon branch amounting to Rs 316 crore or more may remain a mystery. It may offer interesting lessons for the regulators as it has happened in a bank awarded for excellence in almost every sphere of banking activity, including best Internet banking and brand equity. It was reported that the relations manager had got a forged circular in the name of the Securities and Exchange Board of India (SEBI) which claimed that the high return scheme was available only at Citibank's Gurgaon branch. He managed to open 18 fraudulent accounts and succeeded in swindling the investors' money . The top notch bank is expected to have robust computerised information system, enterprise risk management, application of BASEL norms. The foreign-listed bank is regulated by Sarbanes Oxley Act of 2002 in the US and its Indian counterpart is required to comply with the corresponding SEBI Clause 49 Listing Agreement. The bank is regulated by SEBI and the Reserve Bank of India (RBI) and is to be inspected and audited by senior management, internal audit and I-T audit teams, accredited information system auditors as well as external statutory auditors. One of the objectives of SOX and Clause 49 compliance is to build adequate internal controls by testing, validating and overseeing their effectiveness to help the organisation prevent occurrence of fraud and material misstatements in the financial statements. It may be possible that controls may be there to prevent misstatements of financial statements, but controls restricting user access to sensitive functions, information and data and segregation of duties may be lacking.
  • Over 100 cos told to get cost audit done
    Dec 28, 2010
    THE government has mandated cost audits for over 100 companies, covering a host of sectors including pharmaceuticals, fertilisers, steel and petroleum. Cost audit, which is a system of government scrutiny into a company's production cost and profit margins, is currently mandated for only 44 products in sectors like manufacturing, mining and services. The Cost Audit Branch (CAB), a department under the ministry of corporate affairs, in an order issued last week, has asked 115 companies to file their cost audit report for the year ending March 31, 2011. The list of companies includes names like Biocon, Bayer Pharmaceuticals, BASF India, Haldia Petrochemicals, Tata Steel and Steel Authority of India Ltd (SAIL). The present list of companies, which also include many small and mid-cap companies as well, have been formed, on basis of recommendations made by sectoral regulators, in order to keep a track of the costing structure of these companies, said an official in the ministry of corporate affairs, without mentioning details about any firm in particular. The present order has been passed under section 233B of the Companies Act, which gives the government an authority to call for such an audit if it considers it to be necessary. The government has the power to ask the registrar of companies to inspect the books of any company, if any discrepancy is noticed in the cost audit report.
  • MoCA mulls 7-year audit firm tenure
    Dec 27, 2010
    The ministry of corporate affairs may allow companies to retain their audit firms for seven years instead of a maximum consecutive term of five years, as recommended by the parliamentary standing committee on finance in August. However, individual auditors working on behalf of these firms may not be so lucky. The ministry is likely to cut their term from the currently proposed five years to a maximum of four years. The changes are meant to make the draft Companies Bill 2009 more industry friendly. Industry bodies such as CII had strongly opposed the move to impose frequent rotation of auditors. The Bill is expected to be tabled in Parliament during the Budget session early next year.
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