All Holding Companies Must Be Responsible for Their Subsidiaries Documentation
Companies in India are subject to the Company Act, right from registration of the business to the winding up of a company. All accounting, bookkeeping standards, as well as financial reporting and audit, must be by the Institute of Chartered Accountants India. India is in its final stages of revising its current provisions within the Company Act to comply with those of international accounting standards. Thus, a group audit for holding company in India will soon be able to produce reports similar to international accounting standards. First, let’s have a look at what entails a group audit.
Most holding companies would have several subsidiaries within its control. There are also holding companies that administer non-corporate subsidiaries. Active subsidiaries must produce a financial statement for their holding company. Before that, each company would need to hire an auditor to ensure their business activities comply with whatever provisional law within the Company Act in India. Rightfully, the holding company should already have an auditor ready when subsidiaries need it. The auditor of the holding company must have access to all documentation, accounts and bookkeeping of the subsidiaries that will be consolidated. Consolidation of financial statements is what entails a group audit of a holding company in India. If none of the documentation is available, the auditor should receive adequate records stating the basis of consolidation.
Under One Financial Statement
In the light of consolidating accounts, it also means that holding companies must combine the financial statement of its entities. Its entities can be corporate subsidiaries or non-corporate subsidiaries. Currently, the Company Act requires subsidiaries to attach their respective financial information with the holding company. However, once a group audit for holding company in India takes place, such a requirement will be obsolete. As practised in other countries, holding companies in India will soon have a single financial statement, with all its entities financial statement consolidated as well.
Currently, there is no specific statement prescribing a minimum period for a fiscal year for a company in India. Without knowledge of doing ethical business, any company can go on and on with no end. Nevertheless, as India is finalising its accounting standards, supposedly there is a first fiscal year for all companies. The first fiscal year runs from the date of incorporation to the following 31st March. Then, the next financial years must end at every ensuing 31st March. However, there are regulated provision to present the accounts to shareholders within six months of the end of the fiscal year.
If you are one of the entities of a holding company, seek clarification before diving into auditing your account. Whether you need to hire an auditor or engage with the auditor of the holding company, our auditing team will be honoured to advise you the necessary.