Unit – 4
Company Auditor
As discussed in earlier units, Auditing is a logical procedure to inspect the accounts of a business entity to verify their accuracy. Audit need to be conducted by a person/firm possessing required qualifications. Audit procedure includes review of the books of accounts and checking of internal control of the organisation. The person/firm conducting the audit procedure is the ‘Auditor’ of the entity.
There are two types of Auditors: Statutory Auditor and Internal Auditor.Statutory Auditor has to be an independent person/firm to audit the financial statements and make a report on them. Internal Auditors are employees of the company. They are employed to improve an organisation’s operations. Companies Act, 2013 deals in detail stating eligibility of a person to be an Auditor. The Powers, Rights, Duties and all other provisions related to the Auditor and that of Auditing are explained in length in the Companies Act, 2013.
Section 141 deals with the eligibility qualifications and disqualifications of an Auditor
- A person shall be eligible for appointment as an Auditor of a company only if he is a Chartered Accountant.
- Discussion on appointment of Auditors may be grouped under two broad headings viz., Appointment of First Auditors and Appointment of Subsequent Auditors.
The first Auditor of a company other than a government company shall be appointed by the board of directors within 30 days from the date of registration of the company.
In case they fails to appoint the members of the company within 90 days appoint the Auditor at an extra ordinary General Meeting and search appointed Auditor shall hold office till the conclusion of the first Annual General Meeting.
The first Auditor of a government company shall be appointed by the Comptroller and Auditor General of India within 60 days from the date of registration of the company. *In case the CAG does not appoint, the Board of Directors shall appoint the Auditor within next 30 days.
In case they fails to appoint, the members of the company, within 60 days, appoint the Auditor at an extra ordinary General Meeting. In any case mentioned above, the appointed Auditor shall hold office till the conclusion of the first Annual General Meeting.
4.3.3 Appointment of Subsequent Auditors:
Section 139 subsection 1 of the Companies Act 2013 provides that every company shall appoint and individual or a firm as an Auditor at the first Annual General Meeting you shall hold office from the conclusion of that Meeting till the conclusion of its sixth Annual General Meeting and thereafter the conclusion of every vi meeting. The company shall inform the Auditor concerned of his appointment and also file a notice of appointment to the Registrar within 15 days of the appointment.
In case of a Government Company, the CAG of India shall appoint an Auditor within 180 days from the commencement of a Financial Year.
As per section 142 of the act the remuneration of the Auditor of a company shall be fixed in its General Meeting however board may fix remuneration of the first Auditor appointed by it
It has also been clarified that the remuneration to the Auditor shall also include any facility or facilities provided to him.
The Auditor has the following Powers or Rights while conducting an Audit:
- Right of Access to Books etc.: Auditor of a company shall have a right of access to the books of accounts and vouchers of the company whether captain the registered office of the company or at any other place and he is entitled to require from the officers of the companies, such information and explanation as he may consider necessary for the performance of his duties as an Auditor.
- Right to Obtain Information and Explanation from Officers: the right of the order to obtain from the officers of the company search information and explanations as he think necessary for the performance of his duties as Auditor is a wide and important power
- Right to Receive Notices and to Attend General Meetings: the Auditors of a company are entitled , which members are entitled to receive and to be heard at any general meeting in any part of the business of the meeting which concerns them as Auditors
- Right to Report to the Members of the Company on the Accounts Examined by him: The Auditor shall make a report to the members of the company on the accounts examined by him.
- Right to Lien: The Auditor can exercise lean on works and documents placed at his position by the client for non-payment of fees, for work done on the books and documents.
- Duty of Auditor to Enquire on Certain Matters: It is the duty of Auditor to enquire on the following matters:
Whether loans and advances made by the company have been properly secured and whether the terms on which they have been made our prejudicial to the interests of the company or its members
Whether transactions of the company which are represented nearly by book entries are prejudicial to the interests of the company
Whether loans and advances made by the company have been shown as deposits
Whether personal expenses have been charged to revenue account
- Duty to Sign the Auditor Report: The person appointed as an Auditor of the company shall sign the Auditor's report or 35 any other document of the company in accordance with the provisions of sub section 2 of section 141
- Duty to Comply with Auditing Standards: Every Auditor shall comply with the auditing standards as per section 143 sub section 9 of the Companies Act 2013
- Duty to Report on Frauds: If an Auditor of the company in the course of the performance of his duties as Auditor, has reason to believe that an offence involving fraud is being or has been committed against the company by officers for employees of the company, we shall immediately report the matter to the central government within such time and in such manner prescribed in rules 13 of the Companies (Audit and Auditors) Rules, 2014
- Duty to State the Reason for Qualification or Negative Report: Whether any of the matters required to be included in the audit report is answered in the negative or without qualification the report cell state the reasons there for.
Audit report is written opinion on an entity's financial statements by an Auditor.
The Auditor's report should contain at an expression of opinion on the financial statements taken as a whole.
Basic elements of the Auditor's report:
1) Title: the Auditor's report shall have a title that clearly indicates that it is the report of an independent Auditor.
2) Introductory Paragraph: the introductory paragraph in the Auditor's report shall
- Identify the entity whose financial statement certain audited
- Identify the title of each statement that comprises the financial statements
- Specify the date or period Covered by each financial statement comprising the financial statements
3) Management's Responsibility for the Financial Statements:The section of the Auditor's report describes the responsibilities of those in the organisation that are responsible for the preparation of the financial statements.
4) Signature of the Auditor: The Auditor's report shall be signed.
5) Date of the Auditor’s Report: The Auditor's report shall be dated no earlier than the date on which the Auditor has obtained sufficient appropriate audit evidence.
6) Place of Signature: The Auditor's report shell name specific location which is ordinarily the city where the audit report is signed.
Reference
- Auditing – T. R. Sharma – SahityaBhawan Publications.
- Auditing – B. K. Mehta – SBPD.
- Auditing – N. L. Nadda.
- A Hand Book of Practical Auditing - B. N. Tandon, S. Sudharsanam& S. Sundharabahu – S. Chand.
- Auditing – O. P. Gupta, B. N. Ojha, B. K. Singh – S. Dinesh & Co.
- Auditing: Theory and Practice – G. D. Verma, Pradeep Kumar, BaldevSachdeva, Jagawant Singh – Kalyani Publisher
