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CSEET · Fundamentals of Accounting · Introduction to Company Accounts

Under the Companies Act, 2013, when may a company re-open its books of account and recast its financial statements?

A company cannot re-open its books or recast financial statements on its own decision. It may do so only after an application is made and a court of competent jurisdiction or the Tribunal orders it, because earlier accounts were fraudulent or affairs were mismanaged, casting doubt on reliability.

  1. AWhenever the board of directors resolves to do so
  2. BWhenever the statutory auditor requests it
  3. COnly when an application is made and a court of competent jurisdiction or the Tribunal orders it on grounds of fraudulent preparation or mismanagementCorrect
  4. DWhenever shareholders pass an ordinary resolution at a general meeting

Explanation

Section 130 bars a company from re-opening its books or recasting financial statements unless an application is made by the Central Government, Income-tax authorities, SEBI, another statutory regulator or a person concerned, and a court or the Tribunal orders it. The order must find that the earlier accounts were prepared fraudulently or that affairs were mismanaged, casting doubt on reliability. Board, auditor or shareholder decisions alone are not enough.

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