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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Legislative Framework of Corporate Governance in India

A board paper at Rohini Steels Ltd claims that the company may prescribe its own accounting standards if they are more conservative than ICAI's. Based on section 133, what is the correct position on who prescribes accounting standards?

The claim is wrong. Section 133 gives the power to prescribe accounting standards to the Central Government, acting on recommendations of ICAI after consulting NFRA. A company's board, auditor or shareholders cannot prescribe their own standards under this provision.

  1. AThe Board may prescribe standards by passing a resolution
  2. BThe Central Government prescribes standards as recommended by ICAI, so the company cannot prescribe its ownCorrect
  3. CThe statutory auditor prescribes the standards each year
  4. DThe shareholders prescribe the standards at the annual general meeting

Explanation

Section 133 vests the power in the Central Government, acting on ICAI's recommendations in consultation with NFRA. Neither the Board, auditor nor shareholders are given power to prescribe standards, so the claim in the board paper is wrong.

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