The financial statement of the company is required to be prepared in compliance with the accounting standards issued by the central government and as per schedule III of the act. Section 133 prescribes that the central government on the recommendation of the Institute of chartered accountants of India and in consultation with the National Financial Reporting Authority (NFRA) shall prescribe the accounting standards.
The standards are a set of rules and guidelines issued for preparation of uniform and consistent financial statement. The accounting standards also prescribe necessary disclosures to be made while preparing the financial statements. The objective of the accounting standards are to prescribe requirements for recognition of business information, the methods of its measurements and its presentation and disclosure required concerning monetary transactions.
The accounting standards apply to all companies irrespective of its size and type. The statutory auditor of the company is under a statutory duty to report any variance from the prescribed accounting standards. While recording the transactions of financial nature in the books of account the accountant or the bookkeeper must follow the rules in word and spirit.