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CSEET · Fundamentals of Accounting · Introduction to Company Accounts

Which statement about re-opening of a company's books of account is correct under the Companies Act, 2013?

A company cannot re-open its books or recast financial statements unless an application is made and a court or the Tribunal orders it, on the ground that earlier accounts were prepared fraudulently or the company's affairs were mismanaged, casting doubt on the reliability of the statements.

  1. AA company may recast its financial statements at will by passing a board resolution
  2. BRe-opening needs an application and an order of a court or the Tribunal that earlier accounts were fraudulently prepared or affairs were mismanagedCorrect
  3. COnly the auditor may re-open books, without any order
  4. DRe-opening is allowed for any period without limit

Explanation

Section 130 bars re-opening or recasting unless an application is made and a court or the Tribunal orders it on grounds of fraud in preparing earlier accounts or mismanagement casting doubt on reliability. A board resolution or auditor action is not enough. The period is also limited to eight preceding financial years, subject to a longer direction.

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