provision related to audit and auditor companies act, 2013

COMPANIES ACT, 1956

CHAPTER - X

COMPANIES ACT, 2013

AUDIT AND AUDITORS

COMPANIES ACT, 2013Content :

1. Introduction of Act, 2013

2. Chapter – X Audit and Auditors

Introduction of Act, 2013

The Companies Act, 2013, enacted on 29th August, 2013 on accord of Hon’ble President’s assent, has the potential to be historic milestone, as its aim to improve corporate governance, simplify regulations, and enhance the interests of investors. The new law was replaced nearly 60-year-old Companies Act, 1956.

Introduction of Act, 2013

Companies Act, 2013 contains follows :

• Chapter I to XXVII

• The Act has 470 sections

• It applies to the whole of India

Chapter: X Audit & AuditorsChapter X contain following :

Appointment of Auditors. Removal, resignation of auditors and special notice. Eligibility, quality and disqualifications of Auditors. Remuneration of auditors. Powers and duties of auditors and ASs. Restrictions on certain services. Auditors to sign audit reports. Attend general meeting Punishment for contravention. CG to specify audit of item of cost in respect of certain

companies.

Chapter: X Audit & Auditors

Section 139 - Appointment of Auditors.

Appointment of the first auditor -

• Other than Government Company the BOD appoint within 30 days of incorporation of company, if fails to appoint then member shall appoint within 90 days at the EGM.

• Government Company the CAG appoint within 60 days of incorporation of company, if fails to appoint then BOD shall appoint within next 30 days, if BOD also fails to appoint then members can appoint within 60 days from intimation from BOD about failure to appoint. Company should inform the auditor concerned of his or its appointment and file notice of appointment with registrar within 15 days of the meeting



Appointment of the subsequent auditor –

The written consent and certificate from auditor at every AGM.

Government Companies-Within 180 Days from 1st April

Non-Government Companies-To hold office till conclusion of 6th AGM (subject to

rectification by members at every AGM)



Audit Tenure for auditor and audit firm

For all the company appointment period maximum up to for individual; one term of 5 consecutive years and for audit firm; two term of 5 consecutive years.

Cooling off period 5 years before next appointment.

Auditor can be appointed as individual / Audit Firm Audit firm also including LLP incorporated under LLP Act, 2008



Retiring auditor may be reappointed at AGM if –

1. He is not disqualified for reappointment.

2. He has not given the company a notice in writing of his unwillingness to be re-appointed; and

3. A special resolution has not been passed at that meeting appointing some other auditor or providing expressly that he shall not be re-appointed.

No audit firm having a common partner/partners to other audit firm whose tenure has expired in a company immediately preceding the financial year.



Filling of casual vacancy

• In case of non Government Company vacancy shall be filled by BOD within 30 days, but such vacancy is as a result of the resignation of an auditor, such appointment shall also be approved by the company at a general meeting convened within 3 months of the recommendation of the Board and he shall hold the office till the conclusion of the next annual general meeting.

• In case of Government Company vacancy shall be filled by CAG within 30 days. If CAG does not fill the vacancy within the period, BOD shall fill the vacancy within next 30 days.


Section 140 - Removal, resignation of auditors and special notice.

Before expiry of term removed from his office by to passing special resolution after obtaining previous approval of CG.

Auditor who has resigned shall file within 30 days from the date of resignation

Non compliance of Section 140(2) punishable with fine Rs. 50,000 to 5,00,000 Special notice shall be required for appointing a person as auditor other than a retiring auditor. The Tribunal is empowered to change the auditor of a Company in case of any fraudulent activities by auditor.


Section 141 - Eligibility, quality and disqualifications of Auditors. Eligibility and qualification of Auditors • A CA within the meaning of the CA Act, 1949 may be appointed as an auditor. Only a CA holding a CP can be appointed as an auditor. • A firm where of all the partners practicing in India are qualified for appointment may be appointed by its firm name to be the auditor of a company. • Where a firm including a LLP is appointed as an auditor of a company, only the partners who are CA shall be authorized to act and sign on behalf of firm.


Section 141 - Eligibility, quality and disqualifications of Auditors. Disqualification of auditors • Body corporate other than LLP Act, 2008. • Officer or employee of the company; • A person who is a partner, or who is in the employment, of an officer or employee of the company; • A person who, or his relative or partner falling under 141(3)(d) (i.e. persons holding any security or any interest in the company or its subsidiary of such holding company) is disqualified for appointing as an auditors.


Section 141 - Eligibility, quality and disqualifications of Auditors.• Person or firm who directly or indirectly has business relationship with the company or its subsidiary, holding or subsidiary of such holding company or associate company . • A person whose relative is a director or is in the employment of the company as a director or key managerial personnel. • 10 years not yet elapsed of convicted by court of an offence. • If person who provides services to company which prescribed under section 144.

• A person who is in full time employment elsewhere or a person or a partner of the firm holding appointment as its auditor.


Section 142- Remuneration of auditors

The remuneration of the auditor of a company shall be fixed in its general meeting or in such manner as may be determined therein: Provided that the Board may fix remuneration of the first auditor appointed by it. The remuneration shall in addition to the fee payable to an auditor, include the expenses, if any, incurred by the auditor in connection with the audit of the company and any facility extended to him but does not include any remuneration paid to him for any other service rendered by him at the request of the company.


Section 143 – Powers & duties of auditors & Auditing Standards

Powers and Right of Auditor.

Auditor have right to access all time books of accounts kept at any place on his tenure of audit. Auditor have also entitled to get explanation form any officer of the company and amongst other inquire into following matters, namely; which they have been made are prejudicial to the interest of the company or its member ;-

• Loan and advances made on the basis of securities and properly secured.

• Transactions of the company which are represent merely by book entries.

• Non investment or non banking company which have more investment as an assets and sold less than purchase price.



• Whether loans and advances made by the company have been shown as deposits.

• Whether personal expenses have been charged to revenue account.

• where shares allotted for cash; whether cash has actually been received or no, whether position of the books of account and balance-sheet is correct, regular and not misleading.

Holding company’s auditor also have right to access all subsidiary company for its consolidated financial statement.

Powers and Right of Auditor.



Duties of auditors Duty to make report to the member of the company on the accounts examined by him. The audit report shall also state;• Details of obtained information and the effect of such information on the

financial statements.• Examination of those books required by law and proper returns adequate

for the purpose of his audit have been received from branches not visited by him.

• Report on account of Branch office.• Comply with Accounting standards.• Any adverse effect on the functioning of the company.



In case of govt. company auditor so appointed shall submit report to CAG and CAG have right to conduct on a supplementary audit within 60 days from the date of receipt of report. Every auditor shall comply with the auditing standard issued by ICAI support with CG and NFRA.

If any officer or employee has been committed any fraud against his company then auditors duty to immediately report to CG. If auditor not comply with this provision, he shall punishable with fine rupee 1 lakh to 25 lakh.

Duties of auditors


Section 144 – Auditing not to render certain services.

This section is newly inserted in the Act.

An auditor appointed under this Act shall provide to the company only such other services as are approved by the Board of Directors or the audit committee, as the case may be, but which shall not include any of the following services :

(a) accounting and book keeping services; (b) internal audit;(c) design and implementation of any financial information system;(d) actuarial services;(e) investment advisory services;(f) investment banking services;(g) rendering of outsourced financial services;


Section 144 – Auditing not to render certain services.

(h) management services; and(I ) any other kind of services as may be prescribed: Provided that an auditor or audit firm who or which has been performing any non-audit services on or before the commencement of this Act shall comply with the provisions of this section before the closure of the first financial year after the date of such commencement.


Section 145 – Auditor to sign audit reports etc.

The person appointed as an auditor of the company shall sign the auditor’s report or sign or certify any other document of the company in accordance with the provisions of the Act.

Qualifications, observations or comments on financial transactions or matters, which have any adverse effect on the functioning of the company mentioned in 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.

Section 146 – Auditors to attend general meeting.

All notices of, and other communications relating to, any general meeting shall be Auditors to attend general forwarded to the auditor of the company, and the auditor shall, unless otherwise exempted by the company, attend either by himself or through his authorised representative, who shall also be qualified to be an auditor, any general meeting and shall have right to be heard at such meeting on any part of the business which concerns him as the auditor.



Section 147 – Punishment for contravention.

For The company and every officer of the company • Contravention of section 139 to 146 , Shall be punishable with fine

Rs. 25,000 to 5,00,000 to Company. And every officer who is in default then punishable with imprisonment for a term extend to 1 years or Rs. 10,000 to 1,00,000 or both.

For auditor• Contravenes of section 139, 143, 144 and145 shall be punishable

with Rs. 25000 to 5,00,000.• if auditor willfully or knowingly contravened the above section with

the intention to deceive the company or stakeholder, he shall be punishable with imprisonment for the period which extended to 1 year and with fine 1 lakh to 25 lakh.


Section 147 – Punishment for contravention.

For auditors • Where auditor has convicted under sub-section (2), he shall be

liable to refund remuneration and pay for damages arising out of incorrect or misleading statements made in his audit report.

• The company or authority has to file report with the CG in respect of such damages by auditor in prescribed manner.

• The partner or partners of the audit firm has or have acted in fraudulent manner for such act shall be of partner or partners concerned of the audit firm and of the firm jointly and severely.


Section 148 – CG. to specify audit of items of cost in respect of certain companies.

The central govt. may be, by order to company for cost audit if companies engaged in the production of such goods or providing such services as may be prescribed, direct that particulars relating to the utilization of material or labour. • Company have net worth and turnover excess limit prescribed by CG.

then necessary to conducting cost audit by cost auditor with comply of Cost auditing standard issued by ICWAI under ICWA Act, 1959 with approval of CG.

• Cost auditor duty to report on conducted cost audit with explanations.• Company shall duty to furnish report to central government within 30

days from receipt of audit report.• If any default is made; for every officer liable under section 147(1) and

for the auditor liable under section 147(2-4)


Thank You

Prepared and Presented By :CA-Final Student : Paresh A. Vadher Em@il: [email protected]

mailto:[email protected]

provision related to audit and auditor companies act, 2013

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