The department of company affairs is considering stricter punishment norms for auditor misconduct which include imprisonment of up to 10 years.
The department is examining a report of an internal committee which has recommended appointment of a chief accounts officer by companies with a paid up capital of over Rs 5 crore.
The committee, headed by RD Joshi, director general, investigation and registration, in DCA was set up to review the impact of amendments to the Companies Act.
According to the report, auditors should be mandated to check and report misuse of funds.
It has proposed insertion of a provision in the Companies Act to punish those who indulge in falsification of books.
The CAO, who would need to be a member Institute of Chartered Accountants of India or the Institute of Cost and Works Accounts of India, would be the single officer responsible for proper maintenance and correctness of the accounts. At present, the board of directors is responsible for accounts.
In addition, to clamp down on the number of subsidiaries floated by companies and permit only one level of subsidiaries. This would mean an arm of a company cannot set up another subsidiary.
Foreign companies are, however, proposed to be exempted from this provision and will be permitted to go for an extra tier.
A restriction on the number of subsidiaries would entail an amendment to section 4 of the Companies Act, 1956.
The Securities and exchange Board of India in its submissions before the Joint Parliamentary Committee probing the stock scam had also recommended a restriction on the number of subsidiaries.
Consolidation of accounts is another move planned by DCA to keep a check on the subsidiaries.
A provision in the Companies Act is proposed which would provide for preparation of consolidated accounts mandatorily by a holding company as and when notified by the government.
It is, however, proposed that a holding need not attach annual reports of its subsidiaries with its own annual report when it prepares group accounts itself and its subsidiaries as required by law.
The committee has also proposed that no company should appoint the same auditor for more than five consecutive accounting years.
However, such an auditor can be considered for appointment after the expiry of five years from the last term of appointment.
