Ministry of corporate affairs inserted a clause (d) in rule 11 of the Companies (Audit and Auditors) Rules, 2014. The Companies (Audit and Auditors) Amendment Rules, 2017 was published in official gazette on 30th March 2017 and came into force from that date.
Newly inserted clause (d) to Rule 11 of the Companies (Audit and Auditors) Rules, 2014 read as under –
“whether the company had 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.”
Newly inserted clause is supported by change in Schedule III of the Companies Act, 2013. In Schedule III, in Division I, in Part I under the heading “General instructions for preparation of Balance Sheet” in paragraph 6, after clause ‘W’, the following clause has been inserted –
“K. Every company shall disclose the details of Specified Bank Notes (SBN) held and transacted during the period 08/11/2016 to 30/12/2016 as provided in the Table below –
| Specified Bank Notes | Other denomination notes | Total | |
| Closing cash in hand as on 08.11.2016 | |||
| (+) Permitted receipts | |||
| (-) Permitted payments | |||
| (-) Amount deposited in Banks | |||
| Closing cash in hand as on 30.12.2016 |
For the purposes of this clause, the term ‘Specified Bank Notes’ shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E), dated the 8th November, 2016 .”.
Copy of Notification S.O. 3407(E), dated the 8th November, 2016 is available here. According to the Notification “Specified Bank Notes” means bank notes of denominations of the existing series (existing on date of said notification) of the value of five hundred rupees and one thousand rupees.
The government want to check incident of money laundering by newly inserted clause in Schedule III and the Audit Rules. This exercise adds into compliance cost. It put genuine transactions made in demonetized currency due to scarcity of new legal currency in market under scanner. This will be challenging for government to target miscreants without harassing genuine, but technically flawed transaction. I doubt any harsh punishment by courts of law without mala-fide intentions. I have full faith in our professional fraternity.
Though, this is one time exercise but without any sunset clause in the schedule as well as the rules.
Anyway, this may result in vanishing shell companies, which might be good for Indian business environment in long run.
AishMGhrana 