Company Laws Basic Concepts-2-Audit

8/8/2019 Company Laws Basic Concepts-2-Audit

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20.01.2009 A Search Right Presentation 1

AUDIT - COMPANY LAWS BASIC CONCEPTS-2

APPOINTMENT & REMUNERATION OF AUDITORS

[(1) Every company shall, at each annual general meeting, appoint an auditor

or auditors to hold office from the conclusion of that meeting until the

conclusion of the next annual general meeting and shall, within seven days of

the appointment, give intimation thereof to every auditor so appointed.

(1A) Every auditor appointed shall within thirty days of the receipt from thecompany of the intimation of his appointment, inform the Registrar in

writing that he has accepted or refused to accept, the appointment.

(1B) No company or its Board of directors shall appoint or re-appoint any

person [who is in full-time employment elsewhere] or firm as its auditor if

such person or firm is, at the date of such appointment or re-appointment,

holding appointment as auditor of the specified number of companies or morethan the specified number of companies:


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At any annual general meeting, a retiring auditor, by whatsoever authority

appointed, shall be re-appointed, unless-

(a) he is not qualified for re-appointment;

(b) he has given the company notice in writing of his unwillingness to be re-

appointed;

(c) a resolution has been passed at that meeting appointing somebody instead

of him or providing expressly that he shall not be re-appointed; or

(d) where notice has been given of an intended resolution to appoint someperson or persons in the place of a retiring auditor, and by reason of the

death, incapacity or disqualification of that person or of all those persons, as

the case may be, the resolution cannot be proceeded with.


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(3) Where at an annual general meeting no auditors are appointed or re-

appointed, the Central Government may appoint a person to fill the vacancy.

(4) The company shall, within seven days of the Central Government's power

under sub-section (3), becoming exercisable, give notice of that fact to that

Government; and, if a company fails to give such notice, the company, and

every officer of the company who is in default, shall be punishable with fine

which my extend to five thousand rupees.

(5) The first auditor or auditors of a company shall be appointed by the

Board of directors within one month of the date of registration of the

company; and the auditor or auditors so appointed shall hold offices until theconclusion of the first annual general meeting:


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REMUNERATION OF AUDITORS

(8) The remuneration of the auditors of a company-

(a) in the case of an auditor appointed by the Board or the Central

Government, may be fixed by the Board or the Central Government, as the

case may be; and

(aa) in the case of an auditor appointed under section 619 by the Comptroller

and Auditor-General of India, shall be fixed by the company in general

meeting or in such manner as the company in general meeting may

determine;

(b) subject to clause (a), shall be fixed by the company in general meeting orin such manner as the company in general meeting may determine.


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QUALIFICATIONS FOR APPOINTING OF AUDITORS

(1) A person shall not be qualified for appointment as

auditor of a company unless he is a chartered accountant

within the meaning of the Chartered Accountants Act,

1949 (38 of. 1949):

Provided that a firm whereof all the partners practicing in

India are qualified for appointment as aforesaid may be

appointed by its firm name to be auditor of a company, in

which case any partner so practicing may act in the nameof the firm.


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QUALIFICATIONS FOR APPOINTING OF AUDITORS

(3) None of the following persons shall be qualified for appointment as auditor of a

company-

(a) a body corporate;

(b) an officer or employee of the company;

(c) a person who is a partner, or who is in the employment, of an officer or employee of

the company;

(d) a person who is indebted to the company for an amount exceeding one thousand

rupees, or who has given any guarantee or provided any security in connection with the

indebtedness of any third person to the company for an amount exceeding onethousand rupees;

5[(e) a person holding any security of that company after a period of one year from the

date of commencement of the Companies (Amendment) Act, 2000.


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POWERS & DUTIES OF AUDITORS

(1) Every auditor of a company shall have a right of

access at all times to the books and accounts and

vouchers of the company, whether kept at the head

office of the company or elsewhere, and shall be

entitled to require from the officers of the company

such information and explanations as the auditor

may think necessary for the performance of his

duties as auditor.


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(1) Every auditor of a company shall have a right of

access at all times to the books and accounts and

vouchers of the company, whether kept at the head

office of the company or elsewhere, and shall be

entitled to require from the officers of the company

such information and explanations as the auditor

may think necessary for the performance of his

duties as auditor.


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(lA) Without prejudice to the provisions of sub-section (1), the auditor

shall inquire-

(a) whether loans and advances made by the company on the basis

of security have been properly secured and whether the terms on

which they have been made are not prejudicial to the interest of thecompany or its members;

(b) whether transactions of the company which are represented

merely by book entries are not prejudicial to the interests of the

company;


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(c) where the company is not an investment

company within the meaning of section 372 or a

banking company, whether so much of the assets of

the company as consist of shares, debentures and

other securities have been sold at a price less than

that at which they were purchased by the company;

(d) whether loans and advances made by the

company have been shown as deposits;


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(e) whether personal expenses have been charged to revenue

account;

(f) where it is stated in the books and papers of the company

that any shares have been allotted for cash, whether cash hasactually been received in respect of such allotment, and if no

cash has actually been so received, whether the position as

stated in the account books and the balance-sheet is correct,

regular and not misleading.


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REPORT OF AUDITORS

(2) The auditor shall make a report to the members of the company

on the accounts examined by him, and on every balance-sheet and

profit and loss account and on every other document declared by this

Act to be part of or annexed to the balance-sheet or profit and loss

account which are laid before the company in general meeting during

his tenure of office, and the report shall state whether, in his opinionand to the best of his information and according to the explanations

given to him, the said accounts give the information required by this

Act in the manner so required and give a true and fair view-

(i) in the case of the balance-sheet, of the state of the company's

affairs as at the end of its financial years; and

(ii) in the case of the profit and loss account, of the profit or loss forits financial year.


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REPORT OF AUDITORS

The auditor's report shall also state-

(a) whether he has obtained all the information and

explanations which to the best of his knowledge and belief

were necessary for the purposes of his audit;

(b) whether, in his opinion, proper books of account as

required by law have been kept by the company so far as

appears from his examination of those books, and proper

returns adequate for the purposes of his audit have been

received from branches not visited by him;


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REPORT OF AUDITORS

(bb) whether the report on the accounts of any branch office audited

under section 228 by a person other than the company's auditor has

been awarded to him as enquired by clause (c) of sub-section (3) of

that section and how he has dealt with the same in preparing the

auditor's report;

(c) whether the company's balance-sheet and profit and loss account

dealt with by the report are in agreement with the books of account

and returns;

3(d) whether, in his opinion, the profit and loss account and balance-

sheet comply with the accounting standards referred to in sub-

section (3C) of section 211.


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REPORT OF AUDITORS

[(e) in thick type or in italics the observations or comments of the

auditors which have any adverse effect on the functioning of the

company;

(f) whether any director is disqualified from being appointed as

director under clause (g) of sub-section (1) of section 274

5(g) whether the cess payable under section 441A has been paid and

if not, the details of amount of cess not so paid.


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REPORT OF AUDITORS

(5) The accounts of a company shall not be deemed as not having

been, and the auditors report shall- not state that those accounts

have not been properly drawn up on the ground merely that the

company had not disclosed certain matters if-

(a) those matters are such as the company is not required to discloseby virtue of any provisions contained in this or any other Act, and

(b) those provisions are specified in the balance-sheet and profit and

loss account of the company.


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SIGNATURE OF AUDIT REPORT ETC

Only the person appointed as auditor of the

company, or where a firm is so appointed in

pursuance of the proviso to sub-section (1) of

section 226, only a partner in the firm practising in

India, may sign the auditor's report, or sign or

authenticate any other document of the company

required by law to be signed or authenticated by the

auditor.


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READING AND INSPECTION OF AUDITORS REPORT

The auditor's report shall be read before the

company in general meeting and shall be open to

inspection by any member of the company


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RIGHT OF AUDITOR TO ATTEND GENERAL MEETING

All notices of, and other communications relating

to, any general meting of a company which any

member of the company is entitled to have sent to

him shall also be forwarded to the auditor of the

company; and the auditor shall be entitled to attend

any general meeting and to be heard at any general

meeting which he attends on any part of the

business which concerns him as auditor.


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PENALTY FOR NON-COMPLIANCE

If default is made by a company in complying with

any of the provisions contained in section 225 to

231, the company, and every officer of the company

who is in default, shall be punishable with fine

which may extend to five thousand rupees.


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POWER OF CENTRAL GOVERNMENT TO DIRECT SPECIAL AUDIT INCERTAIN CASES

(1) Where the Central Government is of the opinion-

(a) that the affairs of any company are not being managed in

accordance with sound business principles or prudent commercial

practices; or

(b) that any company is being managed in a manner likely to cause

serious injury or damage to the interests of the trade, industry or

business to which it pertains; or

(c) that the financial position of any company is such as to endanger

its solvency;

the Central Government may at any time by order direct that a special

audit of the company's accounts for such period or periods as may

be specified in the order


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INVESTIGATION OF THE AFFAIRS OF A COMPANY

(1) The Central Government may, where a report has been made by

the Registrar under; sub-section (6) of section 234, or under sub-

section (7) of that section, read; with sub-section (6) thereof, appoint

one or more competent persons as inspectors to investigate the

affairs of a company and to report thereon in such manner as the

Central Government may direct.(2) Where-

(a) in the case of a company having a share capital, an application

has been received from not less then two hundred members or from

members holding not less than one-tenth of the total voting power

therein, and

(b) in the case of a company having no share capital, an application

has been received from not less than one-fifth of the persons on the

company's register of members,

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Company Laws Basic Concepts-2-Audit

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