New Delhi, June 23: The new Companies Act seeks to make the chief accounts officer (CAO) of a corporate entity responsible for accounting standards maintained by his company. In other words, he or she will be culpable if the accounting books of a company are not clean.
Besides attracting provisions of the Companies Act, legal experts feel the CAO may even be charged under the criminal procedure code in certain specific cases.
“The onus of keeping books clean now no longer vests upon the board or the external auditors, it rests on the finance man inside a company,” said Deepak Bhattacharya, a top corporate lawyer practising in the Supreme Court.
The changes being brought about in the proposed Companies Act, makes it mandatory for all public limited companies above Rs 3 crore to appoint a whole-time qualified chief accounts officer.
Umesh Sehgal, a partner in a leading CA and law firm in Delhi, said, “The Bill will intrinsically relate the role of a CAO as the custodian of the accounting standards being issued by ICAI from time to time.”
The CAO has to be either a member of the Institute of Chartered Accountants of India (ICAI), constituted under the Chartered Accountants Act, 1949 or a member of the Institute of the Cost and Work Accountants of India (ICWAI) constituted under the Cost and Work Accountants Act, 1959.
Such account officers shall be responsible for the proper maintenance of the books of accounts of the company and will have to ensure proper disclosure of all required information in the prospectus or any other offer document. They will also have to ensure compliance of the provisions of the Companies Act relating to the accounts.
“The CAO, who basically performs the role of an accounts officer, is to ensure that the new accounting standards being brought about from time to time are complied with,” said . D. Gupta, ex-president of ICAI, who is also a practising chartered accountant.
It may be noted that the various accounting standards brought out by the ICAI, the apex professional body for the profession of chartered accountancy, was not mandatory prior to December 2000.
“With the accounting standards having become mandatory, there has to be a qualified personnel in the company, who has to ensure that the standards are being complied,” said Gupta.