Summary: The signing of a company’s financial statements is a critical legal requirement under the Companies Act, 2013, ensuring the accuracy and transparency of the financial information disclosed. Financial statements, which include the balance sheet, profit and loss account, cash flow statement, changes in equity, and notes to accounts, must be signed by key personnel such as the Chairperson, two directors (one being the Managing Director), and the Chief Financial Officer (CFO) and Company Secretary (CS) if appointed. In the case of a One Person Company, a single director’s signature suffices. The board must first approve the financial statements before they are signed, with the signing occurring after the board meeting and before the Annual General Meeting (AGM). Shareholders must then approve the financial statements at the AGM, further reinforcing the importance of this process in upholding corporate governance. Non-compliance with these requirements can result in legal penalties, underscoring the importance of meticulous adherence to statutory obligations. This practice not only fulfills legal requirements but also ensures the integrity of financial reporting, fostering transparency and maintaining stakeholder trust.
Financial Statement
The financial statement is crucial document of company of corporate entity which is audited by Auditor (Individual Auditor/ Audit Firm) of corporate entity. This article explore the statutory provision regarding signing of Financial Statement of Company by Auditor.
Financial statements provide summary of Assets, liability and member’s equity, in short it is form record of financial activities and position of company.
Financial statement includes Balance Sheet, P&L Account, Cash Flow statement, Statement of change in Equity, Notes to accounts, Directors Report and Auditor Report.
Companies must file their financial statements with the Registrar of Companies (ROC) and publish them in accordance with the rules and regulations prescribed. If company is subsidiary then required to prepare Consolidated Financial Statements.
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Signing of Financial Statement
1. Who should sign the Financial Statement?
As per sec 134(1) of Companies Act, 2013 Financial Statement shall be signed by-
- Chairperson of Company as authorized by Board of Company regardless whether chaired by meeting or not or
- Two director of company (one of whom shall be Managing Director) and
- CEO, CFO and CS if appointed.
In case of One Person Company then Financial Statement signed by one director only.
2. Date of Signing Financial Statement?
Financial Statement shall be first approved by Board.
Date of Signing of Financial Statement shall be after the date of Board Meeting in which Financial Statement approved by board.
3. Date of holding Board Meeting for approval of Financial Statement?
The Board meeting for the approval of the financial statements must be held before the company’s Annual General Meeting (AGM). The Board meeting for approving the financial statements should be scheduled well before the AGM to allow sufficient time for audit and other formalities.
4. Can one director sign Financial Statement?
Under the Companies Act, 2013, the signing of financial statements by only one director is generally not permitted. Therefore financial statements signed by two director of company and one of whom shall be Managing Director.
In case of One Person Company then Financial Statement signed by one director.
Under the Companies Act, 2013 in India, shareholder approval is necessary for the adoption of the audited financial statements of a company. After the Board’s approval, these audited financial statements must be presented to the shareholders at the annual general meeting (AGM). Shareholders are then required to approve the financial statements through a resolution passed at the AGM.
Mandatory Signing of financial statements of company by Company Secretary
As per provision of Companies Act, 2013 Chief Financial Officer and the company secretary of the company, wherever they are appointed, required to sign financial statements of company. In simple term if Company appointed Whole time Company Secretary then its mandatory to sign financial statement by company secretary.
What Financial Statement includes?
Sec 2(4) states Financial Statement and it includes-
1. balance sheet as end of financial year
2. profit & loss account (income and expenditure statement in case company carrying on any activity not for profit)
3. cash flow statement for financial year
4. change in equity
5. notes to accounts
provided that financial statement with respect to one person company, small company, dormant company and private company not include financial statement.
Conclusion
The signing of the financial statements by authorized personnel, such as the Chairperson, Managing Director, Chief Executive Officer, and the Chief Financial Officer, signifies their responsibility for the accuracy, completeness, and fairness of the financial information provided.
By signing the financial statements, the directors and officers confirm that the accounts have been prepared in accordance with applicable accounting standards and provide a true and fair view of the company’s financial position and performance. This step is not only a legal requirement but also an essential aspect of good corporate governance and accountability, ensuring transparency and maintaining investor confidence. Failure to comply with these requirements can lead to significant penalties and legal consequences for the company and its management. Therefore, the signing of financial statements is a vital practice that reinforces the company’s commitment to upholding statutory obligations and maintaining trust among its stakeholders.
Also Read:
Board report & financial statement Signing: Companies Act & SEBI (LODR)
Signing of Financial Statement of Company under Companies Act, 2013
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