GM TEST SERIES

CA Inter New Course

Amendments for
Dec’ 2021 Attempt
Auditing and Assurance

Contact No. -9070800090 Email id – Info@gmtestseries.com

 CA INTER NEW COURSE

AUDITING AND ASSURANCE

AMENDMENTS for Nov 2021

Chapter 5 Fraud and Auditor’s Responsibility New Penalty under Companies Amendment Act
2020

Section 143 (15)

New penalty for non-reporting of FRAUD

Section 143 Old penalty for non reporting of FRAUD

(15)
If any auditor, cost accountant or company secretary in practice do not
comply with the above provisions, he shall be punishable with Rs 1,00,000 <
Fine < Rs 25,00,000

Section New penalty for non-reporting of FRAUD

143(15)
CAA- 2020
If any auditor, cost accountant or company secretary in practice does not
comply with the above provisions, he shall be liable to a penalty in case of-
Listed company Rs 5 lakh
Any other company Rs 1 lakh

Chapter 9 – Audit of items of FS

2. Share Capital

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Assertion Valuation
Topic Explanations & Audit procedures
Issue of sweat Sec 54: “Sweat Equity Shares” means equity shares issued by the company to
equity shares employees or directors at a DISCOUNT or for consideration other than cash
for providing know-how or making available right in the nature of intellectual
property rights or value additions, by whatever name called.
The auditor needs to verify that the sweat equity shares issued by the
company are of a class of shares already issued and following conditions have
been complied with:
(a) The issue is authorized by a special resolution passed by the company;
(b) The resolution specifies the number of shares, the current market price,
consideration, if any, and the class or directors or employees to whom such
equity shares are to be issued;
(c) Not less than one year has, at the date of such issue, elapsed since the
date on which the company had commenced business; and
(d) Where the equity shares of the company are listed on a recognized stock
exchange, the sweat equity shares are issued in accordance with the
regulations made by the SEBI in this behalf and if they are not so listed, the
sweat equity shares are issued in accordance with such rules as may be
prescribed.

Chapter 10- Company Audit

New penalty under companies Amendment Act 2020

Section 140

Removal, Resignation of Auditor & Giving of special Notice

Section 140 Resignation by the Auditor

(2)(3)

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 Old penalty for non filing of Form ADT-3, if the auditor does not comply
above, he or it shall be punishable with
Minimum penalty Rs 50,000 or Auditor’s Remuneration whichever is less
Continuing Rs 500 each day
penalty
Maximum Rs 5,00,000
penalty
New penalty for non-filing of Form ADT-3 [The companies (Amendment) Act,
2020]:-
If the auditor does not comply above, he or it shall be liable to penalty
Minimum Rs 50,000 or auditor’s Remuneration whichever is less
penalty
Continuing Rs 500 each day
penalty
Maximum Rs 2,00,000
penalty

Section 143(15)

New penalty for non-reporting of FRAUD

Section Old penalty for non reporting of FRAUD

143(15)
If any auditor, cost accountant or company secretary in practice does not
comply with the above provisions, he shall be liable to a penalty in case of-
Listed Rs 5 lakh
company
Any other Rs 1 lakh
company

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Section 147

Punishment for contravention

Topic Detailed Discussion

Section 147(1) Old punishment for contravention of section 139 to 146 on company and
the officer in default
Punishment as follows:
On company Rs 25,000< Fine < Rs 5 lacs
On officer in default Imprisonment < 1 year or
Rs 10,000 < Fine < Rs 1 lac or
Both.

Section 147(1) New punishment for contravention of section 139 to 146 on company and
CAA-2020 the officer in default
Punishment as follows:-
On company Rs 25,000 < Fine < Rs 5 lacs
On officer in default Rs 10,000 < Fine < Rs 1 lac

Section 147(2) CAA- Punishment for contravention of section 139,143,144,145

2020 [139,143,144,145] on the AUDITOR
CAA-2020 deletes sec Punishment as follows:-
143 from this sec Contravention of Minimum penalty Rs 25,000
147(2) implying that section Maximum penalty Rs 5 lacs or 4 times
violation of Auditor’s 139,143,144,145, the remuneration of
Duties by Auditor [139,143,144,145] the Auditor
shall not attract 147. (Whichever is less)
Imprisonment < 1 year AND
If an auditor has Minimum penalty Rs 50,000

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 contravened such Maximum penalty Rs 25 lacs or 8 times
provisions knowingly the remuneration of
or will fully with the the Auditor
intention to deceive (whichever is less)
the company or its
shareholders or
creditors or tax
authorities

Sec 143(3): ‘Audit Report’ Amendments

Point Explanation
Sec 143(3) Rule Other Matters to be Included in Auditor Report
11 other matters The auditor’s report shall also include their views and comments on the
to be included in following matters, namely:-
Auditors Report (a) Whether the company has disclosed the impact, if any, of pending
IItigations on its financial position in its financial statements;
(b) Whether the company has made provision, as required under any law
or accounting standards, for material foreseeable losses, if any on long
term contracts including derivative contracts;
(c) Whether there has been any delay in transferring amounts, required to
be transferred, to the Investor Education and protection Fund by the
company.
(d) Whether the company has provided requisite disclosures in its financial
statements as to holdings as well as dealings in specified bank notes during
the period from 8th November 2016 to 30th December 2016 and if so,
whether these are in accordance with the books of accounts maintained by
the company.
(e)

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 (i) Whether the management has represented that, to the best of it’s
knowledge and belief, other than as disclosed in the notes to the
accounts, no funds have been advanced or loaned or invested (either
from borrowed funds or share premium or any other sources or kind of
funds) by the company to or in any other person(s) or entity(ies),
including foreign entities (“Intermediaries”), with the understanding,
whether recorded in writing or otherwise, that the Intermediary shall,
whether, directly or indirectly lend or on behalf of the company
(“Ultimate Beneficiaries”) or provide any guarantee, security or the like
on behalf of the Ultimate Beneficiaries;
(ii) Whether the management has represented, that to the best of it’s
knowledge and belief, other than as disclosed in the notes to the
accounts, no funds have been received by the company from any
person(s) or entity(ies), including foreign entities (“Funding Parties”),
with the understanding, whether recorded in writing or otherwise, that
the company shall, whether, directly or indirectly, lend or invest in
other persons or entities identified in any manner whatsoever by or on
behalf of the funding party (“Ultimate Beneficiaries”) or provide any
guarantee, security or the like on behalf of the Ultimate Beneficiaries;
and
(iii) Based on such audit procedures that the auditor has considered
reasonable and appropriate in the circumstances, nothing has come to
their notice that has caused them to believe that the representations
under sub-clause (i) and (ii) contain any material misstatement.
(f) Whether the dividend declared or paid during the year by the company
is in compliance with section 123 of the companies Act, 2013.
(g) Whether the company, in respect of financial years commencing on or
after the 1st April, 2022, has used such accounting software for maintaining
its books of account which has a feature of recording audit trail (edit log)

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 facility and the same has been operated throughout the year for all
transactions recorded in the software and the audit trail feature has not
been tampered with and the audit trail has been preserved by the
company as per the statutory requirements for record retention.
Sec 143(3) read Auditor’s Report must contain comments on Managerial Remuneration:-
with Sec 197(16) “In our opinion, the managerial remuneration for the year ended March
31, 2021 has been paid/provided by the company to its directors in
accordance with the provisions of section 197 read with schedule V to the
Act.”

Chapter- 11 Audit Report & CARO 2016

CARO 2016 is applicable for December 2021 Exams as notified by ICAI.

Full Class OF CARO 2016 has already been uploaded on You Tube.

All Amendments Class Links and Notes links are posted in my Website.

Applicability of CARO 2016

CARO 2016 shall NOT apply to:

a) Banking company as defined in section 5(c) of the Banking Regulation Act, 1949.

b) Insurance company as defined under the Insurance Act, 1938.

c) Not for profit company licensed to operate under section 8 of the companies Act 2013.

d) One person company as defined in section 2(62) of the companies Act 2013 and small
company as defined in section 2(85) of the companies Act 2013.

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e) Private limited company (not being a subsidiary or holding company of a public company)
with a paid up capital and reserves and surplus not more than Rs 1 crore as on the balance
sheet date and which does not have total borrowings exceeding Rs 1 crore from any bank or
financial institution at any point of time during the financial year and which does not have a
total revenue as disclosed in scheduled III to the Companies Act, 2013 (including revenue from
discontinuing operations) Exceeding Rs 10 crores during the financial year as per the FS.

The order exempts from its application a private limited company which fulfils ALL the following
conditions:

(Cumulative Conditions)

It is not a subsidiary or holding company of a PUBLIC company

Its paid-up capital and reserves and surplus < Rs 1 crore as on balance sheet date
Its Total borrowings from any bank or financial < 1 crore at any point of time during the
institution financial year.
Its Total revenue as disclosed in scheduled III < Rs 10 crores during the financial year as per
to the companies Act, 2013 (including revenue the FS.
from discounting operations)
(1) Paid-up share capital = equity share capital + Preference share capital
(2) Reserves = All capital Reserves + All Revenue reserves + revaluation reserve – P & L (Dr)
Balance

Definition of small company under the companies Act, 2013

Sec. 2(85) of the companies Act, 2013 defines a small company. As present, it is a private
company which satisfies bot the following thresholds:

1. Paid up share capital < Rs 2 crores AND

2. Turnover < Rs 20 crores.

The following 3 categories of companies shall not be regarded as small companies:

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1. A HOLDING company or a SUBSIDIARY company. (Here the word PUBLIC is not mentioned)

2. A company registered under section 8. or

3. A company or body corporate governed by any SPECIAL Act.

Important Note

If a company is a small company but it could not satisfy the 4 conditions for private company
exemption. still it will be exempted.

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