Audit Requirements under IBC

• U/r 7(2)(ca) and 13(2)(ca) of the IP Regulations, both an IP and IPE are required to pay 1% of their annual turnover to the Board within 30 days of the end of each financial year
  
  
• U/r 7(2)(cb) of the IP Regulations r/w 31A(2) of the CIRP Regulations, a fee of 1% of the cost incurred in a CIRP must be paid to the Board within 30 days of the end of each quarter
  
  
• U/r 15(1)(b) and 15(5) of Liquidation Regulations, the progress report of a Corporate Debtor will contain audited accounts of the liquidator’s receipts and payments for the financial year. This report needs to be filed with the Adjudicating Authority within 15 days of the end of the fiscal year
  
  
• Tabulating all costs and revenues of the IP, IPE, and the Corporate Debtors at the end of every year / quarter is often a huge task that requires at least an internal audit and ideally a statutory audit
  
  
• Due to the incomplete audit, IPs and IPEs are compelled to submit fees to the Board based on provisional financials to comply with the Board's regulations
  
  
• However, these provisional figures are subject to change, resulting in fees being paid to the Board based on inaccurate revenue and cost estimates
  
  
• It is reasonable to expect that any fee levied by any statutory authority, including the Board, should be calculated based on audited financial statements. That is why most taxes and levies are also based on audited financial statements
  
  
• Surprisingly, the Board only requires IPs to complete audits of themselves, IPEs, and Corporate Debtors within tight timelines of 15 or 30 days
  
  
• This expectation is unrealistic and places undue burden on IPs, leaving room for potential misrepresentation to the Board and potential penalties in the future
  
  
• Therefore, the Board may reconsider its timelines for fee levies until audits of IPs, IPEs, and Corporate Debtors can be appropriately completed