IPO Certification Services — CA Certificates for IPO | Nainit Savla & Associates

IPO Certification Services

Q: What is a Reporting Accountants' Report and how is it different from an audit?

The Reporting Accountants' Report examines restated financial statements (3 to 5 years) for DRHP inclusion — verifying restatements, following SEBI's prescribed ICDR format, and including a statement of adjustments. Different from a standard audit: covers multiple years simultaneously and follows SEBI format, not Companies Act format.

Q: What restatements are required in financial statements for an IPO?

SEBI ICDR requires restatements for: prior period errors and items, accounting policy changes (all years on same basis), audit qualification financial impacts, and group structure changes from acquisitions or disposals during the restated period.

Q: Who can issue the Reporting Accountants' Report for an IPO?

Typically the statutory auditor — but a different firm is permitted. The reporting accountants must hold a valid ICAI peer review certificate and must not be subject to SEBI or ICAI disciplinary proceedings at the time of IPO.

Q: What is the Statement of Tax Benefits in an IPO prospectus?

A disclosure document — prepared by tax advisors and CA-certified — explaining income tax benefits available to the company (deductions, depreciation, tax holidays) and shareholders (LTCG at 12.5% above ₹1.25 lakh for shares held 12+ months; STCG at 20% for under 12 months) under applicable laws.

Q: How often must utilisation of IPO proceeds be certified post-listing?

Quarterly — statutory auditor-certified statement submitted to the Audit Committee and disclosed with quarterly financial results until full utilisation. Deviations from stated Objects require shareholder special resolution. A monitoring agency report is required where total IPO proceeds exceed ₹100 crore.

The IPO process requires a substantial number of Chartered Accountant certificates — issued by the statutory auditor, reporting accountants, or independent CAs — certifying various financial, compliance, and operational aspects of the issuer company for inclusion in the Draft Red Herring Prospectus (DRHP) and the final Prospectus. These certificates provide an additional layer of independent professional assurance to SEBI, the exchanges, and the investing public beyond what is contained in the audited financial statements alone. Failure to obtain the correct certificates in the prescribed format is one of the most common causes of SEBI query letters on DRHP filings. We provide all mandatory and commonly required CA certificates for mainboard and SME IPO proceedings.

Net Worth Certificate

CA certificate certifying the net worth of the company as of specified dates — required to demonstrate eligibility under SEBI ICDR Regulations and for banker comfort on the company's financial position at the time of IPO filing.

Working Capital Adequacy Certificate

CA certificate certifying that the working capital requirement stated in the DRHP Objects is accurate and that the company's existing working capital facilities plus IPO proceeds are adequate for the stated period of operations.

Restated Financial Statement Certificate

Certification of the restated financial statements (typically 5 years) prepared for inclusion in the DRHP — verifying that the restatements have been correctly applied and that the restated financials present a true and fair view.

Utilisation of IPO Proceeds Certificate

Post-IPO monitoring — quarterly CA certificates on the utilisation of IPO proceeds against the stated Objects of the Issue, submitted to stock exchanges and reviewed by the Audit Committee under SEBI LODR requirements.

Tax Compliance Certificate

Certificate confirming that all income tax, GST, and other statutory dues are paid or adequately provided for — addressing any outstanding tax demands, assessments, or disputes with appropriate disclosure language for the DRHP.

Related Party Transaction Certificate

Certificate confirming the completeness and accuracy of related party transaction disclosures in the DRHP — verifying that all transactions with promoters, directors, key management personnel, and their relatives are correctly disclosed.

Why IPO Certificates Are Scrutinised So Carefully

SEBI's ICDR Regulations and the exchange listing agreements impose civil and criminal liability on every person who signs or certifies the prospectus for untrue statements or misleading disclosures. Chartered Accountants who issue certificates for an IPO are therefore exposed to significant professional and legal liability — making the quality of the underlying work, the accuracy of the statements certified, and compliance with the prescribed certificate format absolutely critical. A CA certificate issued without adequate verification of the underlying facts, or one that uses incorrect or ambiguous language, can result in SEBI observation letters, exchange queries, investor complaints, and in extreme cases, professional disciplinary proceedings against the certifying CA.

Common CA Certificates Required in an IPO

Certificate of Net Worth (as at recent date and at least 3 historical periods)
Restated Financial Statements examination report (Reporting Accountants' Report)
Working capital adequacy / fund requirement certificate
Certificate on deployment of funds / utilisation of IPO proceeds (post-listing, quarterly)
Tax and statutory dues compliance certificate
Auditor certificate on ESOPs — fair value, accounting, and tax implications
Certificate on related party transactions completeness
Auditor certificate on correctness of the statement of tax benefits included in the DRHP

Frequently Asked Questions

What is a Reporting Accountants' Report and how is it different from an audit?

A Reporting Accountants' Report (also called the Accountants' Report on Restated Financial Information) is the formal examination report issued by the statutory auditor or an independent CA firm on the restated financial statements included in the DRHP — covering typically the last 3 to 5 financial years. It is different from a statutory audit report in several ways: (a) it covers multiple years simultaneously in a single report; (b) it requires the CA to verify that restatements (adjustments to prior period financial statements for accounting policy changes, errors, and prior period items) have been correctly applied; (c) it follows SEBI's prescribed format under the ICDR Regulations rather than the standard audit report format under the Companies Act; and (d) it includes a statement of adjustments explaining each restatement made, which must be cross-referenced to the DRHP narrative disclosures.

What restatements are required in financial statements for an IPO?

SEBI's ICDR Regulations require that the historical financial statements included in the DRHP be restated to reflect: (a) adjustments for prior period items and errors that were recognised in a later period but relate to earlier periods; (b) adjustments for changes in accounting policies — so that all years are presented on the same accounting policy basis; (c) adjustments for audit qualifications — if any year's financial statements carried an audit qualification, the financial impact of that qualification must be reflected in the restated figures; and (d) group company adjustments — where the issuer has acquired or disposed of subsidiaries, joint ventures, or businesses during the restated period, the financial statements may need to be restated to reflect the current group structure. The restated financial statements must be prepared in accordance with Ind-AS or AS (as applicable) and the SEBI ICDR restatement requirements.

Who can issue the Reporting Accountants' Report for an IPO?

The Reporting Accountants' Report is typically issued by the statutory auditor of the company — since they have the deepest familiarity with the company's financial records. However, SEBI permits a different CA firm to act as reporting accountants — and some companies choose to engage an independent firm for the IPO reporting accountants' role, particularly if the existing statutory auditor has a qualification or independence issue. The reporting accountants must be a firm of Chartered Accountants registered with ICAI and must hold a valid peer review certificate (mandatory for audit and assurance work on public interest entities and capital market transactions). SEBI also requires that the reporting accountants not be subject to any SEBI or ICAI disciplinary proceedings at the time of the IPO.

What is the Statement of Tax Benefits in an IPO prospectus?

The Statement of Tax Benefits is a disclosure document — usually prepared by the company's tax advisors and certified by the CA — included in the DRHP explaining the income tax and other statutory tax benefits available to the company and its shareholders under the Income Tax Act, 2013 and other applicable laws. For the company, it typically covers: deductions available under various sections (80IC, 80IA, MAT provisions, etc.), depreciation methods, and any tax holidays. For shareholders, it covers: capital gains tax on listed equity shares (LTCG at 12.5% above ₹1.25 lakh per year for listed shares held over 12 months; STCG at 20% for shares held under 12 months), STT, and other transaction taxes applicable to IPO allottees. The CA certificate confirms that the statement has been correctly prepared based on the relevant laws as at the date of certification.

How often must utilisation of IPO proceeds be certified post-listing?

Under SEBI's LODR Regulations, a listed company must provide a quarterly statement showing the utilisation of IPO proceeds — prepared by the management and certified by the statutory auditor — to the Audit Committee at each quarterly meeting, and thereafter disclosed to the stock exchanges along with the quarterly financial results. This quarterly certification continues until all IPO proceeds have been fully utilised for the stated Objects of the Issue. Any deviation from the stated Objects (change in deployment of IPO proceeds to a different purpose than stated in the prospectus) must be approved by the shareholders by special resolution — and a monitoring agency report is required where the total IPO proceeds exceed ₹100 crore.

Every Certificate Your IPO Needs — On Time, In Format

Complete CA certification support for mainboard and SME IPOs — restated financials, working capital, tax benefits, related party transactions, and post-listing proceeds utilisation.

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