Audit & auditors companies act 2013


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Audit & auditors companies act 2013

  1. 1. 1 Appointment of Auditors and their Rotation AUDIT AND AUDITORS Chapter X Companies Act, 2013
  2. 2. 2 Appointment of Auditors Clause 139 First auditor to be appointed by Board, within 30 days & if not done, then within 90 in EGM, and will hold office till conclusion of first AGM. Subsequent auditors to be appointed at conclusion of first AGM & shall hold office till conclusion of sixth AGM. Maximum Tenure- Not more than 1 Term of 5 Years for individual & Not more than 2 Terms of 5 Years each for Audit Firm. However, appointment has to be ratified by members at every AGM. Prior written consent of auditors is required to be taken. Certificate from auditor that appointment is within the term allowed and within limit and that he satisfies eligibility conditions in Sec 141. Co. to intimate auditor of his appointment. Co. to file notice of auditors appointment with ROC within 15 days of the meeting. Recommendations of Audit Comm.(if any) to be considered for every auditor appointment(including casual vacancy).
  3. 3. 3 Re-appointment of Auditors, Casual Vacancy & Rotation of Auditors Clause 139 Retiring Auditor may be re-appointed, if not disqualified for re-appointment, or not expressed his wish to continue or Special resolution not passed for his re-appointment. If no auditor is appointed or re-appointed, then existing auditor shall continue. Casual vacancy to be filled by Board within 30 days, however for resignation by auditor, appointment to be made in EGM within 3 months of Board recommendation. Cooling Off Period: An individual auditor or an audit firm can’t be re-appointed as auditor for a period of 5 years, after completing their term of 5 years & 10 years respectively. Common Partner Audit Firm: Audit Firm having common partner/s can’t be appointed as auditor, in cooling off period. Members of Co. may decide on rotation of auditing partner & his team. Members may also decide that audit be conducted by more than 1 auditor.
  4. 4. 4 Resignation and Removal of Auditors Clause 140 Resigning auditor shall file Form 10.2 within 30 days from date of resignation with Co. and ROC. Removal of Auditor- Auditor appointed may be removed from his office, before the expiry of his term only by a special resolution, after obtaining previous approval of C.G. Reasonable opportunity of being heard to be given to the auditor being removed.
  5. 5. 5 Appointment of Auditor, other than retiring auditor Special Notice Clause 140 Special Notice is required for appointing an auditor, other than the retiring auditor in AGM. Co. shall immediately send that notice to the retiring auditor Retiring Auditor can make representations Co. may send the same to members, if possible If not sent, representations may be read out at the meeting
  6. 6. 6 Eligibility of Auditors Clause 141 He has to be a Chartered Accountant(C.A.) For an audit firm(including LLP) ,majority of partners practising in India should be qualified C.A. For an audit firm(including LLP)- only partners who are C.A. shall be authorized to act & sign on behalf of firm.
  7. 7. 7 Disqualification of Auditors Clause 141 A body corporate other than LLP An officer or employee of Co. A person who is a partner or who is in the employment, of an officer or employee of the Co. A person who, or his relative or partner: *is holding any security of or interest in the company, its subsidiary, or its holding or associate company or a subsidiary of such holding company. (Can hold upto Rs. 1 Lakh at Face Value) *is indebted to the company in excess of Rs. 1 Lakh *has given a guarantee or provided any security in connection with the indebtedness of any third person to the company in excess of Rs. 1 Lakh.
  8. 8. 8 Disqualification of Auditors- Continued A person or a firm who, whether directly or indirectly, has business relationship with Co. Person whose relative is a director or is in the employee or KMP A person/partner who is in full time employment elsewhere and holds appointment as auditor in more than 20 companies A person who has been convicted by a court of an offence involving fraud and a period of 10 years has not elapsed Any person whose subsidiary or Audit Comm. or any other form of entity, is engaged as on the date of appointment in consulting & specialised services as per section 144. Note:“business relationship” shall construe any transaction entered into for a commercial purpose except those which are in the nature of professional services as permitted to be rendered by an auditor under the Act and the Chartered Accountants Act and the rules and the regulations made under such Act.
  9. 9. 9 Remuneration of Auditors Clause 142) Remuneration of first auditor shall be fixed by the Board Remuneration of other auditors to be fixed in its general meeting. Remuneration shall also include the expenses, if any, incurred by • Auditor in connection with audit • But doesn’t include any remuneration paid to him for any other service rendered by him at the request of the Co.
  10. 10. 10 Powers of Auditors Clause 143 Right to access books of accounts & vouchers of the company at all times Right to ask for such information & explanation as he may consider necessary to enquire on the below matters: • Whether loans & advances made have been properly secured • Whether personal expenses have been charged to revenue account • Whether transactions of the Co. which are represented merely by book entries are prejudicial to the interests of the Co. • Whether loans and advances made by the company have been shown as deposits • Whether cash has actually been received for the shares allotted & if no cash has been received, whether the position as stated in the accounts is not misleading
  11. 11. 11 Audit Report Clause 143 Matters to be covered in the Report will be as follows: Whether he has obtained all the information & explanations to the best of his knowledge Whether proper books of accounts as required, have been maintained Whether report on accounts of branch office has been maintained Whether the Co’s B/S & P/L account dealt with are in agreement with the books of accounts & returns Whether in his opinion, financial statements comply with accounting standards observations or comments of the auditors on financial transactions have any adverse effect on the functioning of the company Whether any director is disqualified from being appointed as a director Any qualification or adverse remark relating to the maintenance of accounts and other matters connected therewith; Whether Co. has adequate internal financial controls system
  12. 12. 12 Auditor not to render certain services Clause 144 Auditor shall provide only such other services as approved by the Board, but which shall not include any of the following services: Accounting and book keeping services; Internal audit Design & implementati on of any financial information system Actuarial services Investment advisory services Investment banking services Rendering of outsourced financial services Management services
  13. 13. 13 Auditor to sign Audit Reports Clause 145 Auditor of Co. shall sign & certify the auditor’s report New Concept - Qualifications, observations which have any adverse effect on the functioning of the Co. mentioned in the auditor’s report shall be read before the company in general meeting and shall be open for inspection by any member of the Co.
  14. 14. 14 Auditors to attend General Meeting Clause 146 All notices of, and other communications relating to, any GM shall be forwarded to the auditor of the company Auditor to mandatorily attend the meeting himself or through his authorised representative who shall also be qualified as an auditor Auditor shall have the right to be heard at such meeting on any part of the business which concerns him as the auditor. Now, if the Audit Report is not qualified, it need not be read at the AGM
  15. 15. 15 Meet us 839, I floor, 2nd cross, 7th Main, HAL II Stg, Indiranagar (near Giria's on 100ft Rd) Ph: 080 40924173 / 25270163 Bangalore. Delhi