Responsibility of Director’s Regarding Accounting and Reporting of Companies by Ananya Rajput

The legal situation of the director of a company is not well-defined well under the Companies Act, 2013. However, Bowen L.J. has held in Imperial Hydropathic Hotel Co, Blackpool v. Hampson that a director acts as the agent, trustee and management partner of the company to transact its operation. The director is responsible for the proper management of the day to day activities of the company. The director is answerable to the members of the company, i.e. shareholders of the company, which has amplified with vide provisions of the Act to a great extent. Therefore, the duties of the director include duty of good faith and maintenance towards the company and the labor assigned to him and within these duties, office and reporting of the company are the statutory duties of the director under the Act.

According to Section 134 of the Act, accounting and reporting of the company comprises of  –   a)preparation of consolidated financial statements attached with auditor’s report under Section 143 of the Act and authentication of the said financial statements, and b) preparation of the Board of Director’s Report including the Director’s Responsibility Statement. The director of the company is responsible to prepare the financial statement including giving a true and fair view of the state of affairs of the company in compliance with the accounting standards as prescribed under Section 133 of the Act in the relevant year. Further, under Section 134(3) of the Act, the Board’s Report includes, the following in the relevant financial year–

  1. corporate social accountability initiative policies of the company, and
  2. conservation of energy, technology absorption, foreign exchange earnings and outgo,
  3. statement indicating development and implementation of a risk management policy for the company including identification therein of elements of risk, if any, which in the opinion of the Board may threaten the existence of the company,
  4. any amount recommended as to be paid by way of dividend,
  5. any amount which the Board proposes to carry to any reserves,
  6. Director’s Responsibility Statement,
  7. extract of annual return of the company,
  8. comments on auditor’s and secretarial audit report,
  9. material changes and commitments made by the director on behalf of the company affecting its financial position,
  10. disclose loans, guarantees or investments under Sections 185 and 186 of the Act made by the director on behalf of the company,
  11. contracts or arrangements with related parties referred to in Section 188 (1) of the Act,
  12. in case of a listed company and every other public company having such paid-up share capital as may be prescribed, a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and individual directors.

The Board’s Report is close to the financial statements so as to provide basis for the stipulations made in the financial statement. The information contained in the Board’s Report includes the financial statement of the subsidiaries, joint venture companies and associate companies.

In addition to the Board’s Report, Director Responsibility Statement is also furnished with  –  a) applicability of the accounting standards during preparation of the annual accounts, b) use of appropriate accounting policies in a consistent, reasonable and prudent manner, c) maintenance of accounting records and safeguarding assets of the company from fraud or other irregularities, d) preparation of accounts in an ongoing concern basis, e) in case of a listed company, satisfactory and effective appropriate internal financial controls, and f) compliance of applicable laws. The Board’s Report along with the Director Responsibility Statement reinforce the director’s responsibility towards the company introspect of its internal control, maintenance of accounting records and preparation of financial statements at the end of the financial year

Further, according to Rule 8 of the Companies (Accounts) Rules, 2014, the Board’s Report includes financial summary; change of nature of business, if any; details of directors or key managerial personnel who were appointed or resigned during the financial year; names of the companies which have ceased to become subsidiary / joint venture /associate; details of the accepted deposits which has remained unpaid or unclaimed; any significant orders passed by the court of law/ tribunals/ competent authorities affecting company’s operation; and satisfactory internal financial controls. These detailed information furnished in the Board’s Report amounts to extensive accounts and reporting of the company’s state of affairs in one financial year.

The director with personal liability towards the losses of the company, if any, due to misappropriation of funds of the company, holds a responsible position in the company. The director, therefore, is answerable towards the members of the company for the usage and management of the accounts of the company in each and every aspect during the relevant financial year. Thus is the director’s responsibility in respect of accounting and reporting of the company.


Leave a Reply


The Hypothyroidism Solution Reviews

The Hypothyroidism Solution Reviews Jodi Knapp’s The Hypothyroidism Solution Reviews – Is the Hypothyroidism Solution really effective? Is it worth buying it? Discover more about The Hypothyroidism Solution. The Hypothyroidism Solution Review Hypothyroidism can be quite stressful and significantly life-changing. The frustrating disease comes with various effects. It thins your hair, increases your weight, affects […]

Read More

Green Otter CBD Gummies Reviews : Price & Where To Buy

✔️Product Name – Green Otter CBD Gummies ✔️Category – Health ✔️Side-Effects – NA ✔️Availability – Online ✔️Rating – ★★★★★ ✔️Price (for Sale) Buy Now Here — Green Otter CBD Gummies (CLICK HERE) ➢VISIT THE OFFICIAL WEBSITE TO BUY TODAY SPECIAL OFFER!! ➢VISIT THE OFFICIAL WEBSITE TO BUY TODAY SPECIAL OFFER!! ➢VISIT THE OFFICIAL WEBSITE TO BUY TODAY SPECIAL […]

Read More

Green Otter CBD Gummies Reviews [Updated 2022]

✔️Product Name – Green Otter CBD Gummies ✔️Category – Health ✔️Side-Effects – NA ✔️Availability – Online ✔️Rating – ★★★★★ ✔️Price (for Sale) Buy Now Here — Green Otter CBD Gummies (CLICK HERE) ➢VISIT THE OFFICIAL WEBSITE TO BUY TODAY SPECIAL OFFER!! ➢VISIT THE OFFICIAL WEBSITE TO BUY TODAY SPECIAL OFFER!! ➢VISIT THE OFFICIAL WEBSITE TO BUY TODAY SPECIAL […]

Read More