advanced auditing

1. Provisions of Companies Act, 1956
as Regards to Maintenance of Books of
Accounts and Registers

2. Accounts of Companies
• The shareholders provide capital to the company
• But, all of them cannot take part in managing the affairs of the
company
• They have every right to know as to how their money has been
dealt with by the directors in a particular period.
• This is why compulsory disclosure has been done through
annual report
• For preparation of annual accounts the maintenance of proper
books of account is a must.

3. Books of Accounts for income tax 1961
: Section 44 AA
• As per section 44 AA , any person carrying on any of the
professions is requires to maintain books of accounts :
 Legal
 Medical
 Engineering
 Architectural
 Accountancy
 Interior decoration
 Any other profession that may be notified by CBDT in
future

4. • The person who are not covered in this list are mandatorily
require to maintain their books of account only if –
- Business Income = exceed 1,20,000 or more
- Business turnover = 10,00,000 or more
( in any of the previous last 3 year)
• For individual, HUF, proprietorship firm
- Business Income = 250,000
- Business turnover = 25,00,000
• For partnership, Companies
- Business Income = 120,000
- Business turnover = 10,00,000
RECENT CHANGES – 1 April 2018

5. Meaning of books of Account:
Companies Act, 1956
In the Companies Act, 1956 , though there was no separate definition
of ‘Books of Account’ but Section 209 of the Act required every
company to keep proper books of account with respect to -
• all sums of money received and expended by the company and the
matters in respect of which the receipt and expenditure take place;
• all sales and purchases of goods by the company ;
• the assets and liabilities of the company;
• in the case of a company pertaining to any class of companies
engaged in production, processing, manufacturing or mining
activities, such particulars relating to utilisation of material or labour
or to other items of cost as may be prescribed, if such class of
companies is required by the Central Government to include such
particulars in the books of account.

6. Companies Act, 2013
Section 2(13) of the Companies Act, 2013 has given an inclusive
definition. “Books of account” , it includes records maintained in
respect of—
• all sums of money received and expended by a company and matters in
relation to which the receipts and expenditure take place;
• all sales and purchases of goods and services by the company;
• the assets and liabilities of the company; and
• the items of cost as may be prescribed under Section 148 in the case of
a company which belongs to any class of companies specified under
that Section.

7. Place of Keeping Books of Account
Section 128(1) of CA,2013
• Registered office
• All or any of the books of accounts may be kept at such other place in
India as the Board of directors may decide.
Section 209(3) of the CA, 1956
Books of account would not be deemed to be kept with respect to the
matters specified below :
• if there are not such books kept as are necessary to give a true and fair
view of the state of affairs of the company or branch office, as the case
may be, and to explain its transactions or
• such books are not kept on accrual basis and according to the double
entry system of accounting.

8. Persons responsible to maintain
books
• Managing Director,
• Whole-Time Director, in charge of finance
• Chief Financial Officer
• Any other person of a company charged by the Board with
duty of complying with provisions of section 128

9. PENALTY- CA 2013 :
• imprisonment for a term which may extend to one year .
Or,
• Fine not less than fifty thousand rupees but which may
extend to five lakh rupees or both.
• imprisonment for a term. which may extend to six
months. Or,
• Fine which may extend to one thousand rupees, or both

10. Period for which books to be
preserved:
• The books of accounts, together with vouchers
relevant to any entry in such books, are required to be
preserved in good order by the company for a period
of not less than eight years immediately preceding
the relevant financial year.

11. Maintenance of Books of Accounts
in Electronic Mode ( CA-2013)
• Companies can maintain of books of account and other books
and papers in electronic mode is permitted.
• The information contained in the records shall be retained
completely in the format in which they were originally
generated,
• There shall be a proper system for storage, retrieval, display or
printout of the electronic records
• The back- up of BOA & other books of the company also
maintained in electronic mode.

12. • The company shall intimate to the Registrar on an annual
basis at the time of filing of the financial statement:
1) the name of the service provider;
2) the internet protocol address of service provider;
3) the location of the service provider (wherever
applicable);
4) where the books of account and other books and papers
are maintained on cloud, such address as provided by
the service provider.

13. Books of Account in Respect of Branch
Office
• The branches of the company, if any, in India or outside India
shall also keep the books of account in the same manner.
• the branch offices are required to send the proper summarized
return at quarterly intervals to the company at its registered
office and kept open to directors for inspection.

14. Inspection by directors
• "Books and Papers" has been defined in section 2(12) which
includes accounts, deeds, vouchers, writings and documents.
The company is, therefore, required to make available the
aforesaid books and papers for inspection by any directors
• director of the Company can inspect the books of accounts of
the subsidiary, only on authorisation by way of the resolution
of Board of Directors.

15. • Where any other financial information maintained outside the
country is required by a director, the director shall furnish a
request to the company setting out the full details of the
financial information
• The said information shall be provided to director within 15
days of receipt of request.
• The director can seek the information only individually and
not by or through his attorney holder or agent or representative