There are Enterprises which required to comply with the Accounting Standards (issued by the ICAI and notified by the Central Government), and which does not required to comply with the Accounting Standards and these are explained in detail below.
An Enterprise does not required to comply with Accounting Standards.
Non Companies like Partnership Firms does not required to comply with the Accounting Standards if they are following rules governed by the Enterprise. i.e., the Members of the ICAI are required to examine the Financial Statements of the Enterprises and that are prepared based on the applicable Accounting Standards or not. If any deviations are found from the Accounting Standards they have to disclose them in their reports.
It is the responsibility of the Management to disclose the Financial Statements of the enterprise and the Auditor’s responsibility is to form an opinion and report upon it.
An Enterprise required to comply with Accounting Standards.
Enterprises like Companies should mandatorily comply with the Accounting Standards, while presenting the Financial Statements.
As per the Section 211(3A) of the Companies Act every Company has to present their Profit and Loss Accounts and Balance Sheet in compliance with the Accounting Standards [As per Section 211 (3A) Accounting Standards means standards of Accounting recommended by the Institute of Chartered Accountants of India, as may be prescribed by the Central Government in consultation with the National Advisory Committee on Accounting Standards established under subsection (1) of section 210A].
And as per Section 211(3C) of the Companies Act, Profit and Loss Account and Balance Sheet must have audited and must have adhered to Account Standards. If Profit and Loss Account and Balance Sheets of a Company does not comply with the Accounting Standards, the Company is required by Section 2011 (3B) to disclose the deviations from the Accounting Standards together with reasons for the deviation and financial effect if any arising due to such deviations.
As per Section 227 (3)(d) of Companies Act, Auditor has to report and form his opinion about the Profit and Loss Account and Balance Sheets of the Company, whether they are prepares in complains with Accounting Standards or not.
In addition to that, Companies listed in Securities and Exchange Board of India (SEBI), are required to comply with the Accounting Standards issued by the Institute of Chartered Accountants of India, by clause 50 of Listing Agreement. SEBI has set up a Standing Committee on Accounting Standards, which mandates the adherence and enforcement of the same through the Listing Agreements between the Companies and recognized Stock Exchanges.
Insurance Regulatory and Development Authority Regulations, 2002 enforces the Enterprises of Insurance Business to adhere to the accounting Standards which are applicable to them.