Latest Amendment in Directors Report and Auditor Report under Companies Act 2013

Director report

The Ministry of Corporate Affairs, Government of India, issued notifications dated 24th March 2021 to amend Companies (Accounts) Rules, 2014 to enhance the disclosures required to be made by the Company in Board Report;

These rules may be called the Companies (Accounts) Amendment Rules 2021.

Above mentioned amendment shall be applicable on Companies for financial year start on or after 01st April 2021.

Amendment in Rule 8 i.e. Matters to be included in Board’s Report. In rule 8, sub-rule 5 after clause x, two new clauses added.

New Clauses:

(xi) The details of an application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 during the year along with their status as at the end of the financial year.

(xii) The details of the difference between the amount of the valuation done at the time of one-time settlement and the valuation done while taking a loan from the Banks or Financial Institutions along with the reasons thereof.

Disclosure on above mentioned two clauses are required to give in the Director’s Report of Companies along with other disclosures.

Amendment in Rule 3 i.e. Manner of Books of Account to be Kept in Electronic Mode. in Rule 3, in sub-rule (1) the proviso shall be inserted:

New Proviso: Provided that for the financial year commencing on or after the 1st day of April, 2022, every company which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of:

  • Recording audit trail of each and every transaction,
  • Creating an edit log of each change made in books of account along with,
  • The date when such changes were made and
  • Ensuring that the audit trail cannot be disabled

Audit Trail means, an audit trail is defined as a step-by-step sequential record which provides evidence of the documented history of financial transactions to its source. An auditor can trace every step of, the financial data of a particular transaction right from the general ledger to its source document with the help of the audit trail. Audit trails are crucial when it comes to validating and verifying the source of a particular transaction. In case an audit trail learns about missing documents during the process, it means that the company does not adhere to the established accounting procedures.

Factors to Consider

  • An audit trail generally starts with an invoice
  • Most businesses and organisations use audit trails as a useful management tool for monitoring finances along with other various resources
  • Audit trails are considered one of the best tools for validating transactions, verifying, and discovering missing information in a company’s financial data
  • These records can also be electronically stored.

Amendment in Audit Report

The Ministry of Corporate Affairs, Government of India, issued notifications dated 24th March, 2021 to amend Companies (Audit and Auditors) Rules, 2014 to enhance the disclosures required to be made by the Company in its Audit Report

This amendment shall effect the Auditor Report as on 31st March 2022 i.e. (f.y. 2021-22).

Amendment in Rule 11 i.e. Other Matters to be Included in Auditors Report. In Rule 11.

  • Existing clause (d) shall be omitted.
  • New Clause (e), (f) & (g) inserted.
    • Camouflaged lending or investment, that is, where out-bound or inbound loans, advances and investments are intended to be routed through a conduit entity, masking the identity of the ultimate beneficiary
    • Compliance with section 123 of Companies Act, 2013 for payment of dividend (paid or declared)
    • The need for accounting software to maintain an audit trail, that is, edit log, of the primary entries, possibly with a view to enable the detection of any changes in primary entries
    • Gaps in valuations of securities, so as to reflect the valuations at the time of borrowing money, and at the time of OTS.


  • The changes in relation to Board Report and auditor report shall be applicable on all the companies
  • The changes are applicable only for the annual financial statements

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June 2021