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First Notes - 21 April 2017

Auditor’s reporting on specified bank notes

ICAI issues an implementation guide for auditor's reporting requirements on Specified Bank Notes post demonetisation


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The Ministry of Corporate Affairs (MCA) through its notification dated 30 March 2017 issued the following:

  • Amendments to the Schedule III of the Companies Act, 2013 (2013 Act): Every company has to disclose the details of Specified Bank Notes (SBN) held and transacted during the period from 8 November 2016 to 30 December 2016 in the format specified by MCA. The MCA also clarified that for the purpose of this disclosure the term ‘SBN’ should have the same meaning as provided in the notification S.O. 3407(E) of the Ministry of Finance, dated 8 November 2016. The notification defines SBN as ‘bank notes of denominations of the existing series of the value of five hundred rupees and one thousand rupees’. 
  • The Companies (Audit and Auditors) Amendment Rules, 2017: The MCA amended the Companies (Audit and Auditors) Amendment Rules, and requires auditors to report on whether the company had provided requisite disclosures in its financial statements as to holdings as well as dealings in SBN during the period from 8 November 2016 to 30 December 2016 and if so, whether these are in accordance with the books of accounts maintained by the company (Rule 11(d)).

The above notifications are applicable from 30 March 2017.

New development

In light of the above, the Institute of Chartered Accountants of India (ICAI) has published an Implementation Guide (IG) on 15 April 2017 to provide guidance in respect of additional disclosure in the Schedule III to the 2013 Act and new Rule 11(d) of the Companies (Audit and Auditors) Amendment Rules (as explained above). The IG contains the following sections:

  • Frequently Asked Questions
  • Illustrative list of audit procedures
  • Reporting scenarios
  • Written representation.

This issue of First Notes provides an overview of the IG issued by the ICAI for auditor’s reporting requirements on the SBN.

To access the text of the IG issued by the ICAI, please click here.

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