Various regulators, including the Ministry of Corporate Affairs, Central Board of Direct Taxes, Securities and Exchange Board of India and Reserve Bank of India have started using the Information Technology Act, 2000 to enhance corporate governance.
The Ministry has okayed the participation through electronic means of shareholders and directors in meetings held under Companies Act, 1956. Further, it okayed the concept of e-voting for companies. Together with SEBI it formulated provisions for sending electronic copies of balance sheets, auditors’ reports and so on to members of the company.
In addition, companies no longer have to submit to the Government an application in physical form for approval under various provisions of the Companies Act, 1956. These initiatives have considerably reduced administrative delays. Another initiative was the introduction of Extensible Business Reporting Language (XBRL) filing for companies, which is designed to help upload financial reports on the Internet. It can handle information in different languages and accounting standards, and can be tailored to meet specific needs.
The RBI, which adopted XBRL before the Ministry, recently mandated that most reports should be submitted through the Internet. Online filing has not only reduced the burden on corporates, it has also brought about consistency in the formats.
The CBDT, too, has been encouraging e-filing of income tax returns by individuals and companies. Realising the enduring benefit and ease of e-filing, through amended rules it now asks an assessee to furnish various reports electronically. Going forward, even tax audit forms (such as Form 3CD, Form 3CA/3CB) should be e-filed by assessees and their auditors.
It is evident that most regulators have realised the need to operate in a digital world. However, they are equally concerned about the associated risks, and are insisting on reports/ certificates from professionals such as chartered accountants on the veracity of the uploaded information.
Accordingly, professionals have to equip themselves with the latest audit techniques. They need to understand the relevant IT laws for their interface with the regulators. For example, when a chartered accountant has to upload his opinion in a Web-enabled form, he may not have an option to include comments on how he arrived at the conclusion. The only alternative is to ensure the audit documentation is sufficiently robust to demonstrate the nature of the work undertaken and the procedures used to arrive at the conclusion. The Institute of Chartered Accountants of India is aware of the increasing obligations of its members, and is constantly endeavouring to equip them with the requisite aids.
The author is Partner, Price Waterhouse
Ridhima Dubey, Senior Manager contributed to the article.