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Companies Act, 2013 - Chapter X - Audit and Auditors

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A detailed presentation prepared by SAS Partners Team which gives an insight into the provisions of Chapter X relating to Audit & Auditors. This Chapter has undergone a sea of changes with new concepts introduced. This presentation will prove to be beneficial for the Corporate, Professionals & Students and will give a birds eye view of the provisions and concepts.

Published in: Law, Business, Economy & Finance

Companies Act, 2013 - Chapter X - Audit and Auditors

  1. 1. 1 Companies Act 2013Companies Act 2013 –– SessionSession IIII COMPANIES ACT 2013 Chapter X- Audit & Auditors 17-04-2014
  2. 2. Chapter X- Index Appointment of Auditor Rotation of Auditor Disqualification Duties of Auditor Prohibited Services 17-04-2014 2 Prohibited Services Reporting of Fraud to Central Government 17-04-2014
  3. 3. 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) 3 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 days Other Reasons By Board with in 30 days 17-04-2014
  4. 4. 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. 417-04-2014 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
  5. 5. 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 5 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 17-04-2014
  6. 6. 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 6 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 17-04-2014
  7. 7. Disqualification of Auditors [Sec 141] (w.e.f 01.04.2014) Auditors RelativePartner Indebted GuaranteeSecurities Holding Company 7 Auditor Firm Direct Business Relation Indirect Subsidiary Associate Subsidiary Company 7 17-04-2014
  8. 8. 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 8 KMP companies Restriction for Non- audit Services An Employee / officer of the Company 17-04-2014
  9. 9. 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 or subsidiary of such company. A person, his relative or partner which is indebted to the company or its holding company or 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 holding or associate company or subsidiary of such holding company. 9 A person, his relative or partner has given guarantee in connection with indebtedness of any third party. A person whose relative is a director or is in the employment of the company as a director or key managerial person. A person who has been convicted by court of offence involving fraud and a period of 10 years has elapsed from date of such conviction. A person whose subsidiary or associate company is engaged in consulting and specialized services as may be prescribed. 17-04-2014
  10. 10. 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 10 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 17-04-2014
  11. 11. 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 not be rendered by a person who makes use of the Auditor’s Trade Mark or Brand Name The said services should not be rendered by parent , subsidiary or associate entity of the Auditing Firm 11 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 not be rendered by relatives or any other person associated with the Auditor of the Company 17-04-2014
  12. 12. 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 12 Board/ Audit Committee Board Replies to Queries Board does not Reply Central Government 17-04-2014
  13. 13. 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 13 Acknowledgment Due confirmation This Section also applies to Secretarial & Cost Auditor, while carrying out the Secretarial Audit u/s 204 and Cost Audit u/s 148 respectively 17-04-2014
  14. 14. Reach us Chennai Indira Devi Complex, II Floor, # 20 Gopalakrishna Street, SAS Partners Corporate Advisors Pvt. Ltd. About SAS PARTNERS; Over 10 years of market presence and serving more than 200 businesses from diversified industries Divisions : Regulatory Advisory & Support division and Transaction & Consulting division. Versatile professional team over 25 professionals comprising of Company Secretaries, Legal, Finance, and Business Professionals Deep rooted entrepreneurial, professional and Soy Joseph , ACS, ACIS (UK) BL Sr Partner – Corporate Regulatory +91 (0) 988421 2845 soy@saspartners.com Sony George Mathew, MBA, LLB, ACS Partner – Corporate Regulatory +91 (0) 98846 56382 sony@saspartners.com 14 Indira Devi Complex, II Floor, # 20 Gopalakrishna Street, Pondy Bazaar, T. Nagar, Chennai – 600 017, TN, India. RMS Apts, Door No 16, 3rtd Floor, No. 12, Gopalakrishna St, Pondy Bazaar, T Nagar, Chennai- 600 017, TN, India Tel: +91 44 2815 2673/ 2815 2674, Email: chennai@saspartners.com Deep rooted entrepreneurial, professional and regulatory relations ISO 9001:2008 Certification by TUV SUD Regulatory Advisory & support division Corporate Secretarial Capital Markets Foreign Exchange Management Intellectual Asset Management Due Diligences Bangalore C – 1, Le Chateau Apartments, No. 90, Infantry Road, (Opposite to Shafina Plaza) Bangalore – 560 001 Tel: +91 98846 56382 Email: bangalore@saspartners.com 17-04-2014

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