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Companies Act 2013Companies Act 2013 –– Session Session IIIICOMPANIES ACT 2013 Chapter X- Audit & Auditors

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Chapter X- Index

� Appointment of Auditor

� Rotation of Auditor

� Disqualification

� Duties of Auditor

� Prohibited Services

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� Prohibited Services

� Reporting of Fraud to Central Government

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Appointment of Auditor [Sec 139] (w.e.f 01.04.2014)

� LLP eligible to become Auditor

� Appointment for a term of 5 years and ratification in every AGM

� Ratification at every AGM by ordinary resolution

� Transition period of three years for complying with the requirement

� If no auditor appointed or re-appointed at the AGM, existing Auditor continues-Sec 139(10)

Particulars Non Government Company Government Company

Appoint of First Auditor By Board

With in 30days (or)

By CAG

With in 60 days of incorporation (or)

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With in 30days (or)

By Members

With in 90 days

of incorporation

With in 60 days of incorporation (or)

By Board

With in next 30 days of incorporation

(or)

By Members

With in 60 days of information

Subsequent Auditors By Members

To hold office till conclusion of 6th

meeting, subject to ratification by members

at every AGM

By CAG

With in 180 days from start of the

Financial Year

Casual Vacancy

Resignation By Members

With in 3 months of recommendation of

Board till next AGM

By CAG with in 30 days

(or)

By Board with in next 30 daysOther Reasons By Board with in 30 days

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Rotation of Auditor [Sec 139 (2) ] (w.e.f 01.04.2014)

Applicable to certain CLASS OF COMPANIES

Individual Auditors - One term (limited to 5 years)

Firm Auditor - Two terms (limited to 10 years)

Cooling Period of 5 years before the reappointment of the same firm.

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Cooling Period of 5 years before the reappointment of the same firm.

• Listed Companies

• Other Public Company – Paid up Capital ≥ Rs. 10 crores

• Private Company – Paid up Capital ≥ Rs 20 crores

• Other Company – Public Borrowing or Public Deposits ≥ Rs 50 crores

Appointment of Auditor [Sec 139] (w.e.f 01.04.2014)

Illustration Explaining Rotation of in case of Individual Auditor.

No. Of consecutive yrs. For which an individual auditor has been functioning as auditor in the same company (in the first AGM held after the commencement of provisions of section 139(2)

Max. No. Of consecutive years from which he may be appointed in the same company (including transitional period)

Aggregate period which the auditor would complete in the same company in view of column I and II

5 years or more 3 years 8 years or more

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5 years or more 3 years 8 years or more

4 years 3 years 7 years

3 years 3 years 6 years

2 years 3 years 5 years

1 year 4 years 5 years

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Appointment of Auditor [Sec 139] (w.e.f 01.04.2014)

No. Of consecutive yrs. For which an individual auditor has been functioning as auditor in the same company (in the first AGM held after the commencement of provisions of section 139(2)

Max. No. Of consecutive years from which he may be appointed in the same company (including transitional period)

Aggregate period which the auditor would complete in the same company in view of column I and II

10 years or more 3 years 13 years or more

9 years 3 years 12 years

Illustration Explaining Rotation in case of Audit Firm

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9 years 3 years 12 years

8 years 3 years 11 years

7 years 3 years 10 years

6 year 4 years 10 years

5 years 5 years 10 years

4 years 6 years 10 years

3 years 7 years 10 years

2 years 8 years 10 years

1 year 9 years 10 years

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Disqualification of Auditors [Sec 141] (w.e.f 01.04.2014)

Auditors RelativePartner

Indebted GuaranteeSecuritiesHolding Company

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Auditor Firm

Direct

Business Relation

Indirect

Subsidiary Associate

Subsidiary

Company

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Disqualification of Auditors [Sec 141] (w.e.f 01.04.2014)

Convicted for 10 years

Auditor’s relative being

Director OR KMP

Auditor in more than

20 companies

Disqualification of Auditors

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KMP companies

Restriction for Non-audit

Services

An Employee/ officer of

the Company

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Disqualification of Auditors [Sec 141] (w.e.f 01.04.2014)

A person, his relative or partner is holding securities or interest in the company orsubsidiary of such company.

A person, his relative or partner which is indebted to the company or its holding companyor associate or a subsidiary company of such holding company.

A person, his relative or partner has given guarantee in connection with indebtedness of any

A person or a firm has a business relationship with the company, its subsidiary, or holdingor associate company or subsidiary of such holding company.

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A person, his relative or partner has given guarantee in connection with indebtedness of anythird party.

A person whose relative is a director or is in the employment of the company as a director orkey managerial person.

A person who has been convicted by court of offence involving fraud and a period of 10years has elapsed from date of such conviction.

A person whose subsidiary or associate company is engaged in consulting and specializedservices as may be prescribed.

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Auditor - Duties

Comply with Auditing Standards also

Upto 20 Companies including Private

Companies for each partner

Report to CG in case fraud committed by officers or

employees

Adverse Remarks in Auditors Report has to

be commented

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To Report Fraud to the Board

To Attend GM unless exempted by the

company

Adverse Remarks in Auditors Report has to

be read in AGM

Report on internal financial reporting

system

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Auditor not to render certain services [sec 144] (w.e.f 01.04.2014)

The Services are :

�Accounting and book keeping services;

� Internal audit;

�Design and implementation of any financial information system;

�Actuarial services;

�Investment advisory services / banking services;

The said services should notbe rendered by a person whomakes use of the Auditor’sTrade Mark or Brand Name

The said services should notbe rendered by parent ,subsidiary or associate entityof the Auditing Firm

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�Investment advisory services / banking services;

�Rendering of outsourced financial services;

�Management services and

�Any other kind of services as may be prescribed.

Transition Period: Till the closure of First FY after the commencement of this Act

The said services should notbe rendered by relatives orany other person associatedwith the Auditor of theCompany

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Reporting of Fraud to Central Govt. [Sec 143(12)] (w.e.f 01.04.2014)

By Whom Officers or Employees of the Company

Affected person Company

MANNER OF REPORTING TO CENTRAL GOVERNMENT

Within 60 days of knowledge of Auditor

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Board/ Audit Committee

Board Replies to Queries Board does not Reply

Central Government

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Reporting of Fraud to Central Govt. [Sec 143(12)] (w.e.f 01.04.2014)

WHOM TO SEND THE REPORT OF FRAUD

Secretary, MCA

Registered Post with Speed Post and e-mail

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Acknowledgment Due confirmation

This Section also applies to Secretarial & Cost Auditor, while carrying out theSecretarial Audit u/s 204 and Cost Audit u/s 148 respectively

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