Auditor’sdemand to stop the fraud with the companies registered with MCA. You can read here for auditors to change the software to stop the fraud.
Auditors ask firms to change software to prevent fraud
- Many companies in India delete old accounting entries and make new entries as soon as the end of a quarter. While this is often done for technical reasons, many suspects that some companies may manipulate financial statements.
- Auditors have asked companies using Bespoke and standalone accounting software to move applications that would not allow them to change or delete any accounting entries, as auditors are now responsible for any such discrepancies.
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The new rules, which came into effect from 1 April, require auditors to change any transaction that they change or remove. Auditors will also be responsible for checking and marking some accounting entries where companies may deal with related entities or individuals, according to regulations notified by the Ministry of Corporate Affairs (MCA).
- In many companies have registered with ROC by taking Company registration in India, India tends to destroy old accounting entries and insert new ones as they get closer to the end of a quarter. While this is often done for technical reasons, many suspects that some companies may manipulate financial statements.
The government has said that since April, companies can only use an accounting system that features an audit trail that records all changes made. This would mean that no accounting entry should be removed and only one rectification entry could be passed with clarification.
- “Most large companies that operate on ERP systems have control to ensure that an audit trail and a log of accounting entries are available (to see if they have made any improvements),”, Sudheer Sony Said, which is SR Bullyboy, an audit firm. “The challenges may be on standalone or Bespoke applications and for medium and small companies that can use the software without enabling or making available such features. Auditors will need to use technology skills to ensure that companies follow these guidelines.
- The industry tracker said the change would help investigators if the company later had fraud.
- “The provision will go a long way in raising the standards of financial bookkeeping and will be helpful to auditors and forensic auditors to trace the original entries and all audit trails,” Karthik Radia, Mazars India, one of the professional services The managing partner said.
- After several corporate governance issues exploded in companies and financial institutions such as ILFS, DHFL, Reliance Capital, Kingfisher and Nirav Modi’s Fire star, the government has attempted to tighten the rules for statutory auditors.
- Many industry experts have complained that auditors are just watchdogs and not bloodshed — a euphemism that emphasizes that audit firms can only monitor to some extent — and yet government agencies go after firms Huh.
- The government has also asked the auditors to ensure that no company is working with the parties or individuals concerned.
- This is important because investigators have found that in many bankruptcy cases companies were working with entities related to promoters or promoter group companies.
- While not allowed to do so in law — companies will create shell companies and then deal with them to bring them around regulation.
- In most bankruptcy and fraud cases this was never reported by the auditors as it was in accordance with the rulesnot anymore. Now auditors will have to approve such transactions.
- SR Batliboi k soni said, ‘The changes will require auditors to obtain representations from management and to ascertain the procedures to ascertain that the funds have not been lent to middlemen for the benefit of other parties.’ “Such transactions can sometimes be undertaken to circumvent the rules on related party transactions, providing evergreen convenience of loans or divert funds. A similar requirement is also levied for the funds received by the company. At times, the auditor may be placed in the role of an investigator to discharge these requirements. “