Director Responsibility Statement under section 134(5) of Companies Act, 2013

Financial statements are prepared from companies books of accounts. The management of a company is responsible for the safekeeping of the company’s books and papers, including books of accounts. In the case of a company, the management is the Board of Directors, and therefore the directors are responsible for the safekeeping of the company’s books and papers. The Director Responsibility Statement is a brief overview of the directors’ responsibilities for the preparation of the company’s financial statements.

Books of account: This is a term used in the Companies Act, 2013 to refer to the records that a company is required to maintain in order to account for its financial transactions.

Financial Statements: It is essential that we comprehend the meaning of those financial statements. Financial Statements are defined under section 2(40) of the Companies Act, 2013, which includes :-

1. Balance Sheet;

2. Profit and Loss Account or Income and Expenditure Account, as the case may be;

3. Cash Flow Statement;

4. Statement of Change in equity, if applicable; and

5. any explanatory notes annexed thereto, or forming part of financial statements.

However, in case of

1. One Person Company (“hereinafter refer to as OPC”);

2. Small Company;

3. Dormant Company; and

4. private company (if such private company is a start-up)

the financial statements may not include the Cash Flow statement.

Content of Directors’ Responsibility Statement

The Directors’ Responsibility Statement refer to in section 134(5) of the Companies Act, 2013 shall state that:-

1. Accounts of the company has been prepared on a going concern basis by the directors of the company;

2. In the preparation of the accounts, the director of the company has followed the applicable accounting standards and has provided proper explanations for any material departures from those standards;

3. Proper accounting policies has been selected and applied them constantly by the directors of the company, further he has made reasonable and prudent judgements to give a true and fair view of the state of affairs of the company;

4. The directors of the company have selected and consistently applied proper accounting policies, and have made reasonable and prudent judgments in order to give a true and fair view of the state of affairs of the company at the end of the financial year;

5. Proper and sufficient care has been take by the directors of the company for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

6. In the case of a listed company, the directors have established and implemented Internal Financial Controls that are adequate and operating effectively;

Internal financial control means the policies and procedures adopted by a company to provide reasonable assurance regarding the achievement of the following objectives:

1. • The reliability of financial reporting.
   • The effectiveness and efficiency of operations.
   • The compliance with applicable laws and regulations
   • The director has devised proper system to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

The Directors’ Responsibility Statement shall be included in the Report of the Board of Directors or Boards Report refer to in section 134(3) & (4) of the Companies Act, 2013