Professional Documents
Culture Documents
CL Kaush Print
CL Kaush Print
Submitted to -
ID NO. – 60
A person certified as a Chartered Accountant (CA) under the Chartered Accountant Act, 1949,
who has received training in reviewing and verifying accounting data, is considered to be an
auditor. According to the 2013 Companies Act's rules, every firm must appoint an auditor. Let's
take a closer look at Sections 139 to 148 of the Companies Act deal with accounts, audit and
auditors in detail.
Introduction:
Who is an Auditor
An auditor is a person assigned to examine a company's books of accounts and determine if the
transactions recorded there are valid and accurate. He also provides an opinion about the overall
picture of the financial statements, including whether they accurately and fairly reflect the
financial position of the entity.
The company's auditors are there to safeguard the interests of the shareholders. The auditor is
required by law to review the directors' accounts and notify them of the company's actual
financial situation. In order to safeguard and maintain the firm in sound financial shape, the
auditor provides his impartial assessment to the owners or shareholders of the company.
Every corporation is required to appoint an auditor at its first annual general meeting. The
auditor can be either an individual or a firm. Reappointments are a part of appointments.
Non-Government Company:
Auditor at First AGM with the written consent and a certificate of Auditor.
The members make the appointment. He will serve until the conclusion of the sixth
annual general meeting (AGM). The appointment must follow the guidelines
established by the auditor.
1
Section 139 of the companies act, 2013
Appointment of Subsequent Auditor
The members made the appointment, and he will serve until the end of the sixth
meeting.
Listed/Specified Company
Auditor at First AGM with the written consent and a certificate of Auditor.
The members can appoint someone for a maximum of 5 or 10 years in a row. There
will be a 5-year cooling-off period before the following appointment.
Government Company
Auditor at First AGM with the written consent and a certificate of Auditor.
The Indian Comptroller and Auditor General makes the appointment. Within 180 days
of April 1st, he must be appointed.
A special notice must be given proposing that such a resolution would be moved at the
following annual general meeting when it is proposed that someone other than the retiring
auditor shall be appointed as an auditor or when it is proposed that the retiring auditor shall not
be re-appointed.
Such a particular notice can be avoided if the retiring auditor has served for a continuous period
of five or 10 years, as appropriate. The following points are relevant for the purpose of a special
notice:
If the auditor notifies the company in writing and recommends that the members be
informed, the company must -
In any resolution-related notice, mention the fact of representation.
The copy of representation should be sent to those members by the company to
whom notice of meeting is sent, whether before or after the receipt of
representation.
A copy of the representation should be lodged with the Registrar if the document
is not sent in this manner.
On receipt of the special notice for removing the auditor, the company should send a
copy of the same to the retiring auditor.
Such representation should be of a reasonable length and not too long.
The special notice should not be received by the company too late for the purpose of
circulation to members.
If the Tribunal determines, after considering an application from the firm or another party who
feels they have been wronged, that the auditor is abusing their rights:
The copy of the representation need not be delivered, and it is not required to be read aloud
during the meeting.
The range of an auditor's responsibilities varies on the type of business the organisation does.
These are a few quick summaries of the tasks and obligations:
To ensure that the statements of account are prepared using the company's books as a
basis. However, the auditor is not responsible for facts that are kept secret and out of
the records and which he is unable to confirm in the normal course of exercising
ordinary care and diligence.
To ensure that the account statements accurately reflect the business's current condition
of affairs.
2
Section 115 of The Company Act, 2013
In order to verify that the management has not gone beyond the scope of the financial
administrative authority granted to it by the articles of incorporation or by any particular
shareholder resolution adopted at a general meeting.
To look into topics regarding which his suspicions are raised as to the outcome of a
specific activity on the part of the company's servants.
The auditor's opinion on the financial statements is included in the auditor's report, which
has a high level of assurance and dependability. The auditor is also allowed to form a
negative opinion about the statements if he believes they don't accurately reflect the
business's financial situation.
Additionally, he will issue an opinion disclaimer if he is unhappy with the material given
and is unable to properly articulate his perspective on the statements. A disclaimer of
opinion basically states that the financial position of the firm cannot be assessed due to the
lack of information provided. It should be mentioned that the report must also provide the
specifics of the causes for such a negative assessment.
Make inquiries
One of the auditor’s important duties is to make inquiries, as and when he finds it
necessary. A few of the inquiries include:-
Determine whether loans and advances made using security are adequately secured
and have fair terms.
If any personal costs (costs unrelated to the business) are incurred, whether they are
billed to the revenue account
Where loans and advances are made, they are shown as deposits. d. Whether the
financial statements comply with the relevant accounting standards
Where the auditor is the branch auditor rather than the company auditor, he will assist in
the completion of the branch audit. He must create a report based on the branch's
3
Section 143 of the Companies Act, 2013
accounts as evaluated by him and deliver it to the company auditor. The company auditor
will then add this report into the company's main audit report. Furthermore, if requested,
he may disclose excerpts of his working papers to the business auditor to aid in the audit.
The Central Government issues the Auditing Standards in collaboration with the National
Financial Reporting Authority. These criteria assist the auditor in carrying out his audit
tasks with appropriate ease and precision. It is the auditor's responsibility to follow the
standards while executing his tasks because doing so boosts his efficiency.
Reporting of fraud
In general, when doing his duties, the auditor may have specific suspicions about fraud
within the organisation, such as circumstances where the financial statements and the
statistics contained therein don't quite line up. If he finds himself in such a circumstance,
he must notify it to the Central Government immediately and in the way stipulated by the
Act.
As a professional, the auditor must follow the Code of Ethics and the Code of
Professional Conduct. Part of this is maintaining confidentiality and using reasonable care
in the performance of his obligations. Professional scepticism is another crucial
requirement. In other words, the auditor must have a critical mind and be on the lookout
for any mishaps, errors, and frauds in the financial statements.
Assistance in an investigation
If the company is under investigation, it is the auditor's responsibility to help the officers
as needed. As a result, it can be observed that the auditor's responsibilities are quite
diverse, with a broad and far-reaching impact. A set of audited financial accounts
provides significantly more assurance than regular unaudited financial statements.
The company's books of accounts and vouchers, whether they are held at the
headquarters or elsewhere, must always be accessible to the auditor. It is an
unqualified, unrestricted right that is not subject to any conditions.
All forms of books, including financial, statutory, and statistical books, are included
under the term "book." The right of access implies that an auditor may examine the
company's records, accounts, and vouchers during the audit's regular business hours.
An auditor has the right to request from company officers any information and
justification he may deem relevant for the discharge of his obligations as an auditor.
The auditor is required to indicate in his report whether he has gathered all the data
and justifications that, in his opinion and to the best of his knowledge, were required
for the audit.
When a branch office's accounts are audited by someone other than the company's
auditor, the company's auditor is permitted to visit the branches if he determines that
doing so is necessary for him to accomplish his obligations as an auditor.
The auditor, however, is not permitted to visit a financial company's foreign branches;
it will be sufficient if he is given access to copies of any extracts from the branch's
books or accounts that have been forwarded to the main office in India.
All notices and other communications regarding any general meeting of a corporation
that any member of the company is entitled to receive must be given to the auditor.
He has the right to attend any general meeting and to speak during any general
meeting he attends regarding any matter that affects him as an auditor.
The auditor is not required to attend these meetings, though. Additionally, board
meetings are not covered by this protection.
The special notice intending to dismiss him or propose to appoint any other person as
auditor must include a copy for the retiring auditor to receive. The departing auditor is
entitled to make a written representation and request that it be distributed to the members.
In case the same could not be circulated, the auditor may require that the representation
shall be read out at the general meeting.
The auditor has both the right and the obligation to report to the members on the accounts
he has reviewed, stating whether the information is accurate and complete to the best of
his knowledge and according to the explanations provided to him. The financial
statements must provide a true and fair picture of the company's business operations,
according to the auditor.
The audit report, the balance sheet, and the profit and loss account, along with all the
supporting documents, are all subject to the auditor's right and obligation to sign them.
The auditor is allowed to speak with and obtain expert advice on any unique technical
matters. He has the right to seek legal counsel in order to carry out his obligations
effectively.
Right to receive remuneration
The auditor has an inherent right to compensation for auditing the company's financial
records, but these rights do not become available until after the work has been done.
Failure of the auditor to file a resignation notice with the company and registrar, as well
as the C&AG in the case of government firms. The right to representation was abused/the
auditor acted fraudulently4
Civil Liability - In case of a listed company, INR 5 lakh and in case of any other
company, INR 1 lakh
Civil Liability - Min: INR 25 thousand and Max: INR 5 Lakhs for a company
Min: INR 10 thousand and Max: INR 1 Lakh for every officer in default
Default in complying with the orders of the Central Government pertaining to cost audit7
Defaulting party – Company and Every officer in default and Cost Auditor
Civil Liability - Min: INR 25 thousand and Max: INR 5 Lakhs for a company
Min: INR 10 thousand and Max: INR 1 Lakh for every officer in default
Min: INR 25 thousand and Max: INR 5 Lakhs for cost auditor
Conclusion
An auditor is a designated individual who examines and confirms the accuracy of financial
documents and makes sure that businesses adhere to tax regulations. Their main goal is to
4
Section 140 of The Companies Act, 2013
5
Section 143 of The Companies Act, 2013
6
Section 147 of The Companies Act, 2013
7
Section 148 of The Companies Act, 2013
safeguard companies from fraud and draw attention to any inconsistencies in accounting
practises, among other things.
In general, being an auditor is not a simple job. The auditor has accepted obligations to multiple
parties and the responsibilities that come with being a recognised professional. The
trustworthiness of the financial statements and the information they contain essentially depends
on the auditor's view. Compared to unaudited financial statements, audited financial statements
have a very high level of validity and dependability.