Business Environment and Law-Accounts, Audit And Prevention Of Oppression And Mis Management
Auditors
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To safeguard the interest of the shareholders, the Companies Act provides for the employment of an auditor. The auditor is the servant of the shareholders and his duty is to examine the affairs of the company on their behalf at the end of a year and report to them what he has found.
Auditors:
To safeguard the interest of the shareholders, the Companies Act provides for the employment of an auditor. The auditor is the servant of the shareholders and his duty is to examine the affairs of the company on their behalf at the end of a year and report to them what he has found.
A person shall not be qualified for appointment as an auditor of a company, unless he is a Chartered Accountant within the meaning of the Chartered Accountants Act, 1949.
The following persons, even if they are otherwise qualified, shall he disqualified from being appointed as auditors of a company:
1. A body corporate.
2. An officer or employee of the company.
3. A person who is a partner, or who is in the employment of an officer or employee of the company.
4. A person who is indebted to the company for an amount exceeding Rs. 1,000 or who has given any guarantee of any third person to the company for an amount exceeding Rs. 1,000.
5. 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.
Appointment in annual general meeting: Every company shall, at each annual general meeting, appoint an auditor or auditors to hold office from the conclusion.
A company shall not 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 more than the specified number of companies.
At any general meeting a retiring auditor, by whatsoever authority appointed (Board of Directors, general meeting, annual general meeting or Central Government), shall be re-appointed except in the following cases:
1. If he is not qualified for re-appointment;
2. If he has given notice to the company in writing or his unwillingness to be re-appointed;
3. If a resolution has been passed to the effect appointing somebody instead of him or providing expressly that he shall not be re-appointed; or
4. Where notice has been given of an intended resolution to appoint some person or persons in the place of a retiring auditor, and by reason of death, incapacity or disqualification of that person or of all those persons, the resolution cannot be proceeded with [Sec. 224 (2)]
Appointment by the Central Government: Where at an annual general meeting no auditors are appointed or re-appointed, the Central Government may appoint a person to fill the vacancy.
Appointment of auditors by a special resolution: Sec. 224-A puts another restriction that in the case of a company in which not less than 25 per cent of the subscribed share capital is held, whether singly or in any combination, the appointment or re-appointment at each annual general meeting of an auditor or auditors shall be made by a special resolution .
First auditors: The first auditors of a company shall be appointed by its Board of Directors within one month of its incorporation.
Subsequent appointment (Sec. 225): At the expiry of the term of an auditor, the members may, in the annual general meeting, appoint another person in his place.
Penalty (Sec. 232): If default is made by a company in complying with any of the provisions of Sec. 225, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to Rs. 5,000.
Casual vacancy: The Board of Directors may fill any casual vacancy in the office of an auditor.
The first auditors of company appointed by the directors prior to the first annual general meeting of the company may be removed by the members in a general meeting even if their tenure of office has not expired.
The remuneration of the auditors of a company shall be fixed by the company in general meeting or in such manner as the company in general meeting may determine.
1.As an agent of the members. 2.As an officer of the company and 3.As an employee of the company
1. Right of access to books, accounts and vouchers (Sec. 227).
2. Right to obtain information and explanations (Sec. 227)
3. Right to visit branch offices and right of access to books, etc. (Sec. 228)
4. Where the accounts of any branch office are audited by a person other than the company’s auditor, the company auditor shall
a. Be entitled to visit the branch office, if he deems it necessary to do so, for the performance of his duties as auditor; and
b. Have a right of access at all times to the books and accounts and vouchers of the company maintained at the branch office.
5. Right to receive notice of general meeting and to attend them (Sec. 231)
6. Right to receive remuneration.
1.Acquaintance with the Articles and the Companies Act.
2.Report to members (Sec. 227).
3.Duty of care and caution.
1.Statutory report (Sec. 165)
2.Prospectus (Sec. 56).
3.Assistance in investigation (Sec. 240).
To safeguard the interest of the shareholders, the Companies Act provides for the employment of an auditor. The auditor is the servant of the shareholders and his duty is to examine the affairs of the company on their behalf at the end of a year and report to them what he has found.
Qualifications And Disqualifications Of Auditors (Sec. 226)
Qualifications [Sec. 226 (1)]:
A person shall not be qualified for appointment as an auditor of a company, unless he is a Chartered Accountant within the meaning of the Chartered Accountants Act, 1949.
Disqualifications (Sec. 226 (3)]:
The following persons, even if they are otherwise qualified, shall he disqualified from being appointed as auditors of a company:
1. A body corporate.
2. An officer or employee of the company.
3. A person who is a partner, or who is in the employment of an officer or employee of the company.
4. A person who is indebted to the company for an amount exceeding Rs. 1,000 or who has given any guarantee of any third person to the company for an amount exceeding Rs. 1,000.
5. 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.
Appointment Of Auditors (Secs. 224 And 225):
Appointment in annual general meeting: Every company shall, at each annual general meeting, appoint an auditor or auditors to hold office from the conclusion.
Restriction On The Appointment Of Auditors:
A company shall not 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 more than the specified number of companies.
Compulsory Re-Appointment:
At any general meeting a retiring auditor, by whatsoever authority appointed (Board of Directors, general meeting, annual general meeting or Central Government), shall be re-appointed except in the following cases:
1. If he is not qualified for re-appointment;
2. If he has given notice to the company in writing or his unwillingness to be re-appointed;
3. If a resolution has been passed to the effect appointing somebody instead of him or providing expressly that he shall not be re-appointed; or
4. Where notice has been given of an intended resolution to appoint some person or persons in the place of a retiring auditor, and by reason of death, incapacity or disqualification of that person or of all those persons, the resolution cannot be proceeded with [Sec. 224 (2)]
Appointment by the Central Government: Where at an annual general meeting no auditors are appointed or re-appointed, the Central Government may appoint a person to fill the vacancy.
Appointment of auditors by a special resolution: Sec. 224-A puts another restriction that in the case of a company in which not less than 25 per cent of the subscribed share capital is held, whether singly or in any combination, the appointment or re-appointment at each annual general meeting of an auditor or auditors shall be made by a special resolution .
First auditors: The first auditors of a company shall be appointed by its Board of Directors within one month of its incorporation.
Subsequent appointment (Sec. 225): At the expiry of the term of an auditor, the members may, in the annual general meeting, appoint another person in his place.
Penalty (Sec. 232): If default is made by a company in complying with any of the provisions of Sec. 225, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to Rs. 5,000.
Casual vacancy: The Board of Directors may fill any casual vacancy in the office of an auditor.
Removal Of Auditors:
The first auditors of company appointed by the directors prior to the first annual general meeting of the company may be removed by the members in a general meeting even if their tenure of office has not expired.
Remuneration Of Auditors:
The remuneration of the auditors of a company shall be fixed by the company in general meeting or in such manner as the company in general meeting may determine.
Position Of Auditors:
1.As an agent of the members. 2.As an officer of the company and 3.As an employee of the company
Rights And Powers Of Auditors
1. Right of access to books, accounts and vouchers (Sec. 227).
2. Right to obtain information and explanations (Sec. 227)
3. Right to visit branch offices and right of access to books, etc. (Sec. 228)
4. Where the accounts of any branch office are audited by a person other than the company’s auditor, the company auditor shall
a. Be entitled to visit the branch office, if he deems it necessary to do so, for the performance of his duties as auditor; and
b. Have a right of access at all times to the books and accounts and vouchers of the company maintained at the branch office.
5. Right to receive notice of general meeting and to attend them (Sec. 231)
6. Right to receive remuneration.
Duties Of Auditors:
1.Acquaintance with the Articles and the Companies Act.
2.Report to members (Sec. 227).
3.Duty of care and caution.
Further Duties:
1.Statutory report (Sec. 165)
2.Prospectus (Sec. 56).
3.Assistance in investigation (Sec. 240).
Tags : Business Environment and Law-Accounts, Audit And Prevention Of Oppression And Mis Management
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