Include compliance statement on director remuneration in audit reports: CA body

After some dithering, statutory auditors have finally been directed to include a statement on compliance with `director remuneration’ norms as specified under the company law.

The CA Institute, a professional body overseeing audit profession, has advised its members to include this statement in their audit report and this directive has come with immediate effect, sources close to the developments said.

It will apply for all public companies —both listed and unlisted enterprises. It may be recalled that the Companies Act 2013 has a specific provision requiring the auditor of a company to make a statement as to whether the remuneration paid by the company to its directors is in accordance with the stipulated norms. The auditor also had to make a statement as to whether remuneration paid to any director was in excess of the limits laid down under the law.

Although this provision was in vogue for the last few years, it was not operationalised. But now with some corporate breach on this front, the CA profession regulator has moved to enforce the reporting requirements of the auditor, sources said.

The Companies Act 2013 had considerably liberalised the provisions around managerial remuneration, subject to adequate disclosures to the shareholders. The necessity of approaching the Central Government has been substantially dispensed with.

The Companies Act 2013 stipulates that managerial remuneration payable by a public company to its managing director, the whole-time director cannot in aggregate exceed 11 per cent of the net profit of the company in that financial year.

Srivats.kr@thehindu.co.in

COMMENT NOW