Lok Sabha Question No. 4877 (UNSTARRED), answered on 2017-03-31
Subject: Flouting of Accounting Norms
Ministry: CORPORATE AFFAIRS
Asked by: B. SREERAMULU

## GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS

## LOK SABHA

UNSTARRED QUESTION NO. 4877

ANSWERED ON FRIDAY, THE 31ST MARCH, 2017

[CHAITRA 10, 1939 (SAKA)]

## FLOUTING OF ACCOUNTING NORMS QUESTION

4877. SHRI B. SRIRAMULU:

Will the Minister of CORPORATE AFFAIRS be pleased to state:

- (a) whether  instance  of  audit  firms/companies  indulging  in  flouting  of accounting principles and financial irregularities have come to the notice of the Government in the country during each of the last three years and the current year;
- (b) if so, the details thereof and the number of such cases reported in the country during the above period along with the action taken/being taken by the Government against such firms/companies, firm/company and State/UTwise;
- (c) the losses suffered by the Government due to such violations during the said period; and
- (d) the corrective measures taken/ being taken by the Government in this regard?

## ANSWER

THE MINISTER OF STATE IN THE                   (SHRI ARJUN RAM MEGHWAL) MINISTRY OF CORPORATE AFFAIRS

(a) to (d): Details of cases that have come to notice during 2013-14 and 2014-15 are given at Annexure-I.  The information for the years 2015-16 and 2016-17 is being collected.   No specific instance of financial loss under the Companies Act on account of these irregularities has come to notice.

In such cases appropriate provisions for non-compliance of Companies Act, are invoked, which include section 227 read with section 233  of  Companies  Act,  1956/  section  143  read  with  section  147  of  the Companies Act, 2013.  In addition, wherever required, a reference is made to  the  Institute  of  Chartered Accountants of India for disciplinary action against  the  erring  auditor.    The  Companies  Act,  2013  has  preventive provisions for such irregularities by auditors.  These include:-

- (i) stricter penal provisions in case of non-compliance with provisions of the Act;

(ii) stricter  requirements  with  regard  to eligibility/independence of auditors; (iii) mandatory rotation of auditors; (iv) prohibition on rendering specified non-audit services; (v) role of audit committee with regard to appointment and remuneration of auditors in case of listed companies and companies satisfying specified criteria;  and enhanced disclosures to be made in the Board of directors' report, financial statements and the report of auditors to the shareholders.

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## Annexure-I

## ANNEXURE REFERRED TO IN REPLY TO PARTS (a) to (d) OF THE UNSTARRED QUESTION NO. 4877 FOR ANSWER IN LOK SABHA ON 31.03.2017

Year-wise  and  State-wise  details  of  cases  of  flouting  of  Accounting Principles and financial irregularities by Companies.

| Sl.   |                   | Year    | Year    |
|-------|-------------------|---------|---------|
| No.   | Name of the State | 2013-14 | 2014-15 |
| 1.    | Andhra Pradesh    | 01      | 01      |
| 2.    | Assam             | --      | 01      |
| 3.    | Bihar             | 01      | --      |
| 4.    | Chandigarh        | --      | 03      |
| 5.    | Delhi             | 17      | 16      |
| 6.    | Goa               | 03      | --      |
| 7.    | Gujarat           | 05      | 02      |
| 8.    | Haryana           | --      | 04      |
| 9.    | Karnataka         | 22      | 02      |
| 10.   | Madhya Pradesh    | 01      | 01      |
| 11.   | Maharashtra       | 51      | 37      |
| 12.   | Meghalaya         | --      | --      |
| 13.   | Orissa            | --      | 03      |
| 14.   | Pune              | 01      | --      |
| 15.   | Rajasthan         | 02      | --      |
| 16.   | Tamil Nadu        | 03      | --      |
| 17.   | Uttar Pradesh     | --      | 1       |
| 18.   | West Bengal       | 49      | 50      |
| 19.   | Kerala            | --      | --      |

Further, SFIO has reported that during the last three years and current year a total number of 50 cases were filed involving 45 companies through courts as well as 45 companies were filed with ICAI.

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