Auditors to give info on cos' internal financial controls

To ensure more transparency, auditors will now be required to provide information about a company's internal financial controls and their operating effectiveness in the annual statements.
The new provision would be mandatory for auditors from next financial year starting from April 1, 2015.
The new provision has been introduced by amending the the Companies (Audit and Auditors) Rules, 2014, under the new companies law.
"... For the financial years commencing on or after April 1, 2015, the report of the auditor shall state about existence of adequate internal financial controls system and its operating effectiveness," the Corporate Affairs Ministry said in a statement.

For the current financial year (2014-15), this provision would be made voluntary for the auditor of a company.
Besides, the Ministry has provided clarity with regard to deposits received by a non-profit company.

Clarification was sought on how to handle a situation if a depositor -- who gives Rs 1 lakh -- to a non-profit company fails to secure to more than 25 per cent of total valid votes.
"... It is clarified that in such cases, the board of directors of a Section 8 company is to decide as to whether the deposit made by or on behalf of the person failing to secure more than twenty-five percent of the valid votes is to be forfeited or refunded," the Ministry said in a separate statement.

Non-profit companies are registered under Section 8 of the new companies law, while they came under Section 25 in the Companies Act, 1956.
The Companies Act, 2013 -- most of whose provisions came into force from April 1, this year -- provides for stringent norms aimed at ensuring high corporate governance standards.