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com3 Advance Audit (English)

Question 1-What are the provisions of regarding the appointment removal disqualification and
remuneration of company auditor? (20)

Answer- Appointment of Auditor

The provision regarding the appointment of of auditors are contained in the section 139 of the
companies act 2013.

Appointment of first auditor

1- In case of a non government company.

(A) Appointment by the board of directors within 30 days of the date or registration of the
companies.
(B) If the board fails to appointment the auditors within given time the board shall inform
the members of the company.
(C) The members of the company shall appoint the first auditor at an extra ordinary general
meeting within 90 days
(D) The first auditor shall hold office till the conclusion of the first annual general meeting
(AGM).
2- In case of a government company(section 139(7)
this section includes a government company owned and controlled, aur indirectly by the central
government or the state government or government it or partly by the central government and
party by one or more state governments.
(A) The appointment of first auditor in such companies is done by the comptroller and
auditor general of India (CAG) within 60 days of the the date of registration of the
company.
(B) The appointment of first auditor is failed in stipulated time the board of directors
appoint the auditor within the next 30 days.
(C) Failing the appointment the auditor within 30 days the board shall inform the members
of the company who sell appoint the auditor within 60 days at an EGM.
(D) The auditor shall hold the office still the conclusion of the first AGM.

appointment of subsequent auditor

In Case of non government company

Every company shall at the first AGM a point and individual or form as an auditor. The tenure of the
auditor so appointed will be from the conclusion of the meeting till the conclusion of its sixth AGMand
there after till the conclusion of every sixth meeting. The company shall inform the auditor concerned
regarding such appointment and file a notice of the same with the registrar within 15 days of the
meeting in which the appointment was made.

In case of government companies.

CAG shall appoint the auditor of the company within a period of 180 days from the commencement of
the financial year. The auditor shall hold office till the conclusion of the AGM.
Removal of auditors and giving of of special notice section 140 (1)

An auditor can be removed by passing special resolution by the after obtaining the previous approval of
the central government as per rule 7 of CAAR 2014. According to this rule the application to central
government with prescribed fees has to be made within 30 days of passing the reservation by the board
and within 60 days of the receipt of approval of the central government. The company shall pass a
special resolution in a general meeting. Before taking any action for removal the auditor shall be given a
reasonable opportunity of being heard.

On receipt of such a notice a copy of it shall be sent to the retiring auditor.

Disqualifications of an auditor

Under the act the following persons are not considered eligible for appointment as an auditor of the
company.

1- An officer or employee of the company.

2- A person who is a partner or who is in the employment of an officer or employee of the
company.
3- A person or his relative or is partner holds any securities the face value of which exceeds rupees
100000 in the company.
4- A person whose relatives are directors of the company.
5- A person who is in full time employment elsewhere.
6- Any person whose subsidiary is engaged in consulting and specialised services as provided in
section 144.

Remuneration of auditor

Fixation of remuneration- the remuneration of the auditors of a company shall be fixed in its general
meeting. If the first auditor is appointed by the board of directors the remuneration is fixed by the board
of directors.

Expenses included in the remuneration-expenses here include fee payable to the auditors expenses if
any in curd by the auditor in connection with the audit of the company e and any facility extended to
him. The remuneration shall not be included any amount paid to the auditor for any other service
rendered by him at the request of the company.

Question 2-state the power or right and liability of an auditor.

Answer- Rights or power of auditor (section 143)

1- Right of access two books of account- An auditors shall have a right of access to books of
account and vouchers of the company at all times whether kept at the registered office or at
any place .
2- Right to obtain information and explanation- An auditor shall have to obtain from the officers
of the company such information and explaination as he may think necessary for the
performance of his duties as auditor.
 3- Right of auditor of holding company- The auditor of a holding company shall have right to
access all the records of all its subsidiaries in so far as it relates to the consolidated of its
financial statements.
4- Right to lien – An auditor has the right to exercise lien on books and documents placed at his
possession by the company,if he is denied payment of fees for work done on these books and
account.
Liabilities of a company auditor.
Statutory audit means an audit which is compulsory by the law. In case of a limited
company,audit has been made compulsory by the companies act 2013.
1- Liabilities under the common law
(A) Civil liabilities for negligence- An auditor is expected to exercise reasonable care air
and skill while performing his duties. Incase he fails to perform his duties with
reasonable care he will be held liable for negligence. Buy reasonable care is meant,
such care and skill which is expected from an average person of his profession. The
term negligence has been defined by some judges
(a) Ignoring articles and not to oppose pain dividend out of capital amounts
to nigligence
(b) Not able to detect errors and frauds amount to negligence.
(c) Not verifying petty cash book balance amount to negligence.
(d) Not to work with proper care and is killed amounts to negligence.
(e) In absence of doubtful situation to verify the certificates of trustworthy
officer is not negligence.
(B) Civil liabilities for misfeasance- when an auditor does not for a form wizard dutifully
he can be held liable for breach of the duty and the company can take and action
against the and auditor is liable to indemnify only if the following things are proved
against him.
(!) The auditor owed duty to the plaintiff.
(!!) He failed to discharge his duties.
The following cases where in action watch taking against the auditor for the
misfeasance are listed as follows:
(a) Not to give correct information to the shareholders regarding balance sheet is
misfeasance.
(b) Physical verification of stock is not the duty of an auditor.
(c) Not perform the work carefully and efficiently leads to misfeasance.
(d) Not to understand doubtful facts is misfeasance

Liabilities under Indian companies act 2013.

(1) Civil liabilities