Tag OPC Audit

Are you running Company, either, Private Limited or Limited or OPC? Do you know, irrespective of turnover amount, the Company needs place its Audited Financial statements before the stakeholders in AGM (Except OPC). OPC is exempted from holding AGM/EGM, But Audit is still need to be done and Annual filing of AOC 4 and MGT 7A are mandatory. Statutory Audit must be done, Turnover is not relevant here. Let’s Know more here about.    

One of the most important parts of Indian law that governs how companies’ function, handle their finances, and maintain transparency is the Companies Act of 2013. The audit provisions, which are primarily located in Sections 128 to 138, are among its significant features.

In order to safeguard the interests of creditors, shareholders, and other stakeholders, these regulations are intended to ensure that businesses keep accurate books of accounts and that these accounts are independently reviewed.

1. Section 128 – Books of Accounts

Section 128 requires every company to prepare and maintain proper books of accounts that give a true and fair view of the financial position of the company. These accounts must include records of:

• All money received and spent.
• All sales and purchases of goods and services.
• Assets and liabilities of the company.

The books must be kept at the registered office of the company, although with board approval they can also be kept at another place in India. The law also allows companies to maintain accounts in electronic mode, which is in line with modern business practices.

Importantly, these records must be preserved for at least 8 years, ensuring that there is a proper history available for verification whenever needed.

2. Section 129 – Financial Statements

Section 129 deals with the preparation of financial statements. Every company has to prepare a financial statement at the end of the financial year that presents a true and fair view of the state of affairs of the company.

These statements include:

• Balance Sheet,
• Profit and Loss Account,
• Cash Flow Statement,
• Statement of Changes in Equity, and
• Any explanatory notes.

Listed companies are also required to prepare consolidated financial statements for all their subsidiaries, joint ventures, and associates. These financial statements must comply with accounting standards notified by the government.

Small Company and One Person Company (OPC) are exempted to prepare the Cash Flow Statement.

3. Section 130 – Reopening of Accounts

Sometimes, there may be a need to reopen and revise accounts of a company. Section 130 allows this, but only under specific circumstances and with approval from the National Company Law Tribunal (NCLT). Reopening may be permitted if:

• Accounts were earlier prepared fraudulently, or
• Accounts are found to be incorrect due to mismanagement or other wrong practices.

This provision ensures that the integrity of financial statements is maintained and any wrongdoing can be corrected.

4. Section 131 – Voluntary Revision of Financial Statements

Apart from reopening, Section 131 allows companies to revise their financial statements or board’s report voluntarily, but only if they discover that the original filing did not comply with applicable laws. This revision requires approval from the Tribunal and can only be done once in a financial year.

5. Section 132 – National Financial Reporting Authority (NFRA)

Section 132 establishes the National Financial Reporting Authority (NFRA), which is an independent regulatory body that oversees auditing and accounting standards in India. NFRA has the power to:

• Recommend accounting and auditing standards,
• Monitor compliance,
• Investigate professional misconduct of auditors, and
• Impose penalties or debar auditors in case of violations.

The creation of NFRA has strengthened the audit system in India by making it more accountable and transparent.

6. Section 133 – Central Government and Accounting Standards

Section 133 empowers the Central Government to prescribe accounting standards in consultation with NFRA. This ensures uniformity and consistency in financial reporting across companies in India.

7. Section 134 – Approval of Financial Statements

According to Section 134, the Board of Directors is responsible for approving the financial statements before they are signed and submitted to the shareholders. Along with the financial statements, the Board’s Report is also prepared, which provides key information such as:

• The company’s performance,
• Details of loans, guarantees, and investments,
• CSR activities, and
• Director’s responsibility statement.

This section ensures that directors are held accountable for the financial health of the company.

8. Section 135 – Corporate Social Responsibility (CSR)

Although not directly part of the audit provisions, Section 135 requires certain companies (with a specific net worth, turnover, or profit) to spend at least 2% of their average net profits on CSR activities. The spending and reporting of CSR is also subject to auditing and disclosure norms.

9. Section 136 – Right of Members to Copies

Section 136 gives shareholders the right to receive financial statements and other reports at least 21 days before the annual general meeting. This ensures that members have enough time to review the company’s financial position before making decisions.

10. Section 137 – Filing with Registrar

Once approved, financial statements must be filed with the Registrar of Companies (RoC) within 30 days of the annual general meeting. Failure to comply attracts penalties on both the company and its officers.

11. Section 138 – Internal Audit

Finally, Section 138 makes provisions for internal audit. Certain classes of companies, as prescribed by rules, must appoint an internal auditor (a chartered accountant, cost accountant, or other professional) to check the internal controls and risk management of the company. This adds another layer of accountability and strengthens governance.

Conclusion

India takes corporate responsibility and transparency very seriously, as evidenced by the statutory provisions included in Sections 128–138 of the Companies Act, 2013. These sections address every facet of financial management and auditing, from internal audits to keeping accurate books of accounts. They increase trust among investors in the corporate sector in addition to protecting shareholders’ interests.

Such audit provisions are essential for ensuring that businesses operate responsibly and uphold financial integrity in a developing country like India.