audit of companies
TRANSCRIPT
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Audit of companies in India rules andprocedure
by :
DR. T.K. JAIN
AFTERSCHOOL
centre for social entrepreneurship
sivakamu veterinary hospital road
bikaner 334001 rajasthan, indiaFOR PGPSE PARTICIPANTS
mobile : 91+9414430763
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What is audit ?
Examination of accounts and records to ensurethat they are correct and give proper
information
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What should be qualification of
auditor ?
As per 226(1) : CA as per CA Act 1949
as per 226(3) he should not be company,employee of the company, partner of the
company being audited, debtor of the company
being audited for more than Rs. 1000, or aperson holding voting right in that company
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First auditor
First auditor is appointed by Directors in 1month of date of registration of the company.This auditor works till first AGM, thereafter
AGM will appoint auditor
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Number of audits a CA can
undertake?
A CA can undertake maximum 30 audits(including private companies) in a year
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Procedure of appointment of
auditor
Company to inform the CA about it in 7 days,
CA to give consent in 30 days in form no. 23B
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How to appoint an auditor ?
Special notice of 14 days, with names of theauditor to be appointed
a copy of notice has to be sent to members,directors, retiring auditor etc.
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Casual vacancy ?
It can be filled by board of directors.But when this vacancy is due to resignation,
then only AGM can fill this vacancy.
If there are more than 1 auditor, other auditorscan continue their work on resignation by one
of them.
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Remuneration ....
To be fixed by the AGM
in case of govt. Comapanies, appointment isdone by CAG (comptroller and auditor
general) but remuneration is fixed byshareholders.
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Reappointment of auditor ?
Sec. 224 (2) yes, an auditor can be reappointed,unless, he is unwilling, or unable, or
disqualified, or a resolution has be put for his
removal.
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Does appointment of auditor
require special resolution?
No,
but in some cases yes - when govt. /scheduled banks / insurance companies /
financial institution is holding 25% capital in a
company, the appointment must be by spcialresolution (otherwise the government will
appoint).
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Rights of auditor ?
Sec. 227 ;
he can access accountshe can obtain information and explanation
attend AGM and be heard
receive remunerationvisit branch offices
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Duties of auditor
Sec. 227 :
make audit reportmake adequate disclosure,
attend audit committee meeting of directors
give reasons for qualificationssign the audit report
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Audit of branches
When you will set up branches of yourbusiness all over India / world, then you may
appoint one auditor for all the branches or youmay appoint separate auditors for each branch,
but these auditors must be qualified (as percompany law of that country / India). The
branch auditor shall send his report to the mainauditor. The main auditor can visit the branch
also.
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Special audit (sec. 233A)
The government can order for spcial audit -
when it thinks that the company is not properlymanaged or its affairs need to be examined,
Such auditor will submit his report to the
government covering all the aspects as coveredin sec. 227 + the matters given by thegovernment
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Cost audit 233 B
They undertake verification of cost accounts,
and ensure that cost accounting principles arefollowed :
as per sec. 209 (1)d and 224 (1b) such audit is
done by ICWA / qualified cost auditorcost auditor is appointed by board of directors(with approval of government in some cases)
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Inspection
Inspection is different from audit it is orderedunder sec. 209A.
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Who will order for inspection ?
Registrar
SEBI
other government executives authorised forthis
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Why inspection?
To identify correctness of accountsto ascertain whether statutory auditors have
discharged their duties
to detect miapplication of fundsto detect misuse of funds
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Powers of inspectors ?
Powers equal to Civil Court (discovery &production of books of accounts, summons,enforcing attendance, inspection of books ,
registers etc. )
has the powers of registrar of companies if
doing as per Sec. 234 (inspection on order ofregistrar)
can copy books / mark the books of accounts
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Report of inspection
The inspector will report to Registrar ofcompanies + Ministry of company affairs or
SEBI
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Actions on inspection report
Upon receipt of inspection report, followingactions may be taken up : 1. investigation
under sec. 235
special audit u/s 233A
appointment of govt. Directors 408
or other actions
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Powers of registrars
Can call for documents (sec. 234, 235)
investigation (by government) as per sec. 239,
237, 247)
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Can members (shareholders)
apply to govt for investigation?
As per sec. 235(2) 200 shareholders with
minimum 1/10th of capital can apply forinvestigation of a company
if a company doesnt have shares, then 1/5th
members can applygovt can also order for investigation on special
resolution by company or on order by court
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Powers of investigators
They can examine affairs of related companies
ask for production of documents and for oath
seize documents
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Report by investigators
Sec. 241 : they will submit report to CLB asper 235 / court as per 237
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Action on default
Wind up : 243
actions as per criminal laws 242
recovery of damages 244further investigations of other companies (247)
expenses of investigation (245) by govt, to be
recoverable from the convictemployess are protected (sec. 635B)
freezing of voting rights etc. As per sec. 250
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