ICAI asks auditors to ensure proper disclosure on junked notes

Chartered accountants' apex body ICAI has asked its members to ensure that companies have made adequate disclosures about transactions involving cancelled notes post demonetisation till December 30, 2016.
Companies are required to disclose details about transactions involving scrapped notes from November 8 till December 30 in the annual financial statements and auditors are required to mention in their reports about such details.
In this regard, the Corporate Affairs Ministry has made amendments to certain provisions under the Companies Act, 2013.
Following the Ministry's decision, the Institute of Chartered Accountants of India (ICAI) has issued a communication to its members about the disclosure requirement pertaining to the scrapped notes.

In its efforts to fight the black money menace as well as curb corruption, Prime Minister Narendra Modi on November 8 last year announced cancelling old Rs 500 and 1,000 notes.
From November 8 till December 30, 2016, entities, including individuals, were allowed to deposit the invalid notes with banks. For a brief period, exchange of junked notes was also permitted.

"Every company shall disclose the details of Specified Bank Notes (SBNs) held and transacted during the period from November 8, 2016 to 30th December, 2016" in a given tabular form, the Ministry said in a recent notification.
SBNs are the demonetised notes.

The companies are required to mention closing cash in hand as on November 8 and on December 30.
Besides, the ministry has directed auditors to state "whether the company had provided requisite disclosures in its financial statements as to holdings as well as dealings in SBN during the period from November 8, 2016 to December 30, 2016 and if so, whether these are in accordance with the books of accounts maintained by the company".
Citing these directions from the ministry, the ICAI has issued the communication to its members -- who carry out the audit of companies.
"We request you to please note the amendment and take care in your professional capacity for disclosure requirements and reporting requirements while accounting/ auditing the financial statements for the year 2016-2017," the ICAI communication said.

While the junked notes cannot be used or deposited anymore, NRIs have been allowed to exchange them at the select offices of the Reserve Bank of India (RBI) till June end.