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AUDIT & AUDITORS
139(1)
APPOINTMENT OF AUDITORS [SECTION 139]
APPOINTMENT
139(2)+(3)+(4)
139(8)
139(9)+(10)+(11)
Appointment of auditor [Section 139(1)]:
- At first AGM appoint individual/firm
- shall hold office from the conclusion of 1st AGM till the conclusion of its 6th AGM and thereafter till the conclusion of every sixth AGM.
- MANNER- AC/BOD shall take into consideration 1)experience+qualification-commensurate with size of company 2) pending proceeding before ICAI/Court.
3) such other info.
- PROCEDURE- AC Recommends BOD agrees further recommend in AGM
original recommendation
disagrees
Send own recommendation (reason for disagreement in BR)
refer back for reconsideration (reasons)
CONSENT+CERTIFICATE BY AUDITOR
Content of the Certificate-
- eligible for appointment and is not disqualified for appointment under the Act, the Chartered Accountants Act, 1949 and the rules.
- proposed appointment is as per the term
- proposed appointment is within the limits
- list of proceedings with respect to professional matters of conduct.
certificate shall also indicate whether the auditor satisfies the criteria provided in section 141.
Company shall inform the auditor concerned of his or its appointment and also file a notice (in the Form ADT-1) of such appointment with the Registrar within 15 days of the meeting.
NFRA RULES, 2018
- every existing body corporate other than a company governed by NFRA rules, shall inform NFRA within 30 days of the commencement of the NFRA rules, in Form NFRA-1.
- Every body corporate, other than a company formed in India and governed under NFRA Rules shall, within 15 days of appointment of an auditor inform the NFRA in Form NFRA-1
AUDIT COMMITTEE
SECTION 177
Explanation- The PUSC or T/O or O/S loans, or borrowings or debentures or deposits, as the case may be, as existing on the date of last audited FS shall be taken into account for the purposes of this rule.
Section 139(2)
IMPORTANT POINTS
THINGS TO REMEMBER
- no audit firm having a common partner or partners to the other audit firm, whose tenure has expired in a company immediately preceding the financial year, shall be appointed as auditor of the same company for a period of five years.
- Transitional period-not later than the date of the first AGM of the company held after three years from the date of commencement of this Act.
- nothing shall prejudice the right of the company to remove an auditor/or the right of the auditor to resign.
- members of a company may resolve to provide that (a) in the audit firm appointed by it, the auditing partner and his team shall be rotated at such intervals as may be resolved by members; or the audit shall be conducted by more than one auditor.
- in case of an auditor, the period for which the individual or the firm has held office as auditor prior to the commencement of the Act shall be taken into account for calculating the period of five consecutive years or ten consecutive years, as the case may be;
- the incoming auditor /audit firm shall not be eligible if such auditor or audit firm is associated with the outgoing auditor or audit firm under the same network of audit firms (same brand name, trade name or common control)
- a break in the term for a continuous period of five years shall be considered as fulfilling the requirement of rotation;
- if a partner, who is in charge of an audit firm and also certifies the financial statements of the company, retires from the said firm and joins another firm of chartered accountants, such other firm shall also be ineligible to be appointed for a period of five years.
- Where a company has appointed two or more individuals or firms or a combination thereof as joint auditors, the company may follow the rotation of auditors in such a manner that both or all of the joint auditors, as the case may be, do not complete their term in the same year.
time period
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TERM OF AUDITOR-
No listed company or a company belonging to such class or classes of companies as mentioned above, shall appoint or re-appoint-
(a) an individual as auditor for more than one term of 5 consecutive years; and
(b) an audit firm as auditor for more than 2 terms of 5 consecutive years.
COOLING OFF PERIOD-
(i) an individual auditor who has completed his term under clause (a) shall not be eligible for re-appointment as auditor in the same company for 5 years from the completion of his term;
(ii) an audit firm which has completed its term under clause (b), shall not be eligible for re-appointment as auditor in the same company for 5 years from the completion of such term.
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Casual vacancy 139(8)
Organization
example
Prakash Carriers Limited appointed Mr. Raman as its auditor in the Annual General Meeting held on 30th September, 2016. Initially, he accepted the appointment. But he resigned from his office on 31st October, 2016 for personal reasons. The Board of directors seeks advice for filling up the vacancy by appointment of Mr. Albert as auditor.
In the present case, as the auditor has resigned, the casual vacancy so created can be filled up by the Board appointing Mr. Albert. However, the appointment of Mr. Albert must be approved by the company by passing of an ordinary resolution at a general meeting of the company which must be convened by the Board within 3 months of the recommendation of the Board. Mr. Albert will be entitled to hold office till the conclusion of the next Annual General Meeting.
Who we are
Organization
REMOVAL, RESIGNATION OF AUDITOR AND GIVING OF SPECIAL NOTICE [SECTION 140]
REMOVAL
140(2)+(3)
140(4)
140(5)
REMOVAL
STEPS FOR REMOVAL OF AUDITOR
140(1)
CG APPROVAL
ADT-2
+ OBH
60 DAYS
30 DAYS
SR
BR
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Resignation by Auditor [Section 140(2)]
The auditor shall indicate the reasons and other facts as may be relevant with regard to his resignation, in the statement.
PENALTY
140(3)
2 lacs
Appointing Auditor other than the Retiring Auditor [Section 140(4)]
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(a) If the retiring auditor has not completed a consecutive tenure of 5 years /10 years, as provided under 139(2),
special notice shall be required for a resolution at an AGM appointing as auditor
- a person other than a retiring auditor, or
- providing expressly that a retiring auditor shall not be re- appointed.
(b) On receipt of notice of such a resolution, the company shall forthwith send a copy thereof to the retiring auditor.
(c) Where retiring auditor makes with respect thereto representation in writing to the company (not exceeding a reasonable length) and requests its notification to members of the company, the company shall, unless the representation is received by it too late for it to do so,—
(1) in any notice of the resolution given to members of the company, state the fact of the representation having been made; and
(2) send a copy of the representation to every member of the company to whom notice of the meeting is sent.
(d) If a copy of the representation is not sent as aforesaid because it was received too late or because of the company’s default, the auditor may (without prejudice to his right to be heard orally) require that the representation shall be read out at the meeting.
(e) However, if a copy of representation is not sent as aforesaid, a copy thereof shall be filed with the Registrar.
(f) If the Tribunal is satisfied on an application either of the company or of any other aggrieved person that the rights conferred by this sub-section are being abused by the auditor, then the copy of the representation may not
be sent and the representation need not be read out at the meeting.
DIRECTION BY TRIBUNAL
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EXAMPLE
FLP Ltd, engaged in the business of real estate and energy, defaulted on its borrowings which amounted to thousands of crores. During the year ended 31 March 2019, a fraud was uncovered in respect of various transactions of the company and it was observed by the Central Govt that the auditors of the company were involved in such fraud. Please suggest what can be the course of action in this case.
Solution
The Central Government may apply to the Tribunal in respect of such matter highlighting that the auditors miserably failed to fulfil their duties as auditors of the company. If the Tribunal is satisfied that the auditors were involved in the fraud with the company, the Tribunal may direct the company to change its auditors and those auditors shall not be eligible to be appointed as auditor of any company for 5 years and also liable for action under section 447 of the Companies Act 2013.
POWERS AND DUTIES OF AUDITORS [SECTION 143]
POWERS AND DUTIES
143(1)
(i) Powers of Auditors [Section 143(1)]:
(a) Access to books of accounts and vouchers of the company, whether kept at the registered office of the company or at any other place.
(b) Entitled to have necessary information and explanation from the officers of the company as the auditor may consider necessary for the performance of his duties as auditor.
(c) Access to record of all its subsidiaries and associate companies in so far as it relates to the CFS.
(ii) Duties of Auditors
(a) Matters of inquiry: The auditor shall inquire into the following matters, namely—
(1) Whether loans and advances made by the company on the basis of security have been properly secured and whether the terms on which they have been made are prejudicial to the interests of the company or its members;
(2) Whether transactions of the company which are represented merely by book entries are prejudicial to the interests of the company;
(3) Where the company not being an investment company or a banking company, whether so much of the assets of the company as consist of shares, debentures and other securities have been sold at a price less than that at which they were purchased by the company;
(4) Whether loans and advances made by the company have been shown as deposits;
(5) Whether personal expenses have been charged to revenue account;
(6) Where it is stated in the books and documents of the company that any shares have been allotted for cash, whether cash has actually been received in respect of such allotment, and if no cash has actually been so received, whether the position as stated in the account books and the balance sheet is correct, regular and not misleading.
143(2)
143(2)+(3)+(4)
143(3)
The auditor shall make a report to the members of the company on the following:
(1) On the accounts examined by him; and
(2) On every financial statements which are required by or under this Act to be laid before the company in general meeting;
The auditor while making the report shall take into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of this Act or any rules made thereunder or under any order made under section 143(11). The auditor shall express his opinion on the accounts and financial statements examined by him. He shall express an opinion, according to him and to the best of his information and knowledge, whether the said accounts/financial statements give a true and fair view of the state of the company’s affairs as at the end of its financial year and profit or loss and cash flow for the year and such other matters as may be prescribed.
143(4)
The auditors’ report shall also state—
(a) whether he has sought and obtained all the information and explanations which to the best of his knowledge and belief were necessary for the purpose of his audit and if not, the details thereof and the effect of such information on the financial statements;
(b) whether, in his opinion, proper books of account as required by law have been kept by the company so far as appears from his examination of those books and proper returns adequate for the purposes of his audit have been received from branches not visited by him;
(c) whether the report on the accounts of any branch office of the company audited under sub-section (8) by a person other than the company’s auditor has been sent to him under the proviso to that sub-section and the manner in which he has dealt with it in preparing his report;
(d) whether the company’s balance sheet and profit and loss account dealt with in the report are in agreement with the books of account and returns;
(e) whether, in his opinion, the financial statements comply with the accounting standards;
(f) the observations or comments of the auditors on financial transactions or matters which have any adverse effect on the functioning of the company;
(g) whether any director is disqualified from being appointed as a director under 164(2);
(h) any qualification, reservation or adverse remark relating to the maintenance of accounts and other matters connected therewith;
(i) whether the company has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls;
Exemption to Private Company:-
(i) which is a OPC or a small company; or
(ii) which has turnover > rupees 50 crores as per latest audited FS and which has aggregate borrowings from banks or FIs or any body corporate at any point of time during the FY > rupees 25 crore.
*which has not committed a default in filing of its financial statements under section 137 or annual return under section 92
(j) such other matters as may be prescribed.
Rule 11 -
(a) whether the company has disclosed the impact, if any, of pending litigations on its financial position in its financial statement;
(b) whether the company has made provision, as required under any law or accounting standards, for material foreseeable losses, if any, on long term contracts including derivative contracts;
(c) whether there has been any delay in transferring amounts, required to be transferred, to the IEPF by the company.
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(e) (i) Whether the management has represented that, to the best of it's knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the company to or in any other person(s) or entity(ies), including foreign entities Intermediaris), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in an manner whatsoever b or on behalf of the cy pn (Ultimate Benefiiaries) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
(ii) Whether the management has represented, that, to the be't of its knowledge and belief, other than as disclosed in the notes to the accounts, no funds have been received by tye company from an person(y) or entit(ies), including foreig entities (Fuding Parties), with the understanding, whether recorded in writing or otherwise, that the company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manney whatsoever b or on behalf of tye unding Part (Ultimte Beneficiariey) or provide an guarantee, security or the like on behalf of the Ultimate Beneficiaries; and
(iii) Based on such audit procedures that the auditor has considered reasonable and appropriate in the circumstances, nothing has come to their notice that has caused them to believe that the representations under sub-clause (i) and (ii) contain any mate.and the audit trail
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ial mis-statement.
(f) Whether the dividend declared or paid during the year by the company is in compliance with section 123 of the Companies Act, 2013.
(g) Whether the company has used such accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all transactions recorded in the software feature has not been tampered with and the audit trail has been preserved by the company a per the statutory requirementsn or record retentio..and the audit trail
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Who we are
Where any of the matters is answered in the negative or with a qualification, the auditor’s report shall state the reason for the same.
Audit of Government Companies [Section 143(5), (6) & (7)]:
143(5)+(^6)+((7)
(a) In the case of a Government company or any other company owned or controlled, directly or indirectly, by the CG, or by any SG or Governments, or partly by the CG and partly by one or more SGs, the CAG shall appoint the auditor under section 139(5) or 139(7) and direct such auditor the manner in which the accounts of the Government company are required to be audited and thereupon the auditor so appointed shall submit a copy of the audit report to the CAG.
(b) The audit report among other things, include the following:
(1) the directions, if any, issued by the CAG;
(2) the action taken thereon; and
(3) its impact on the accounts and financial statement of the company.
(c) The CAG shall within 60 days from the date of receipt of the audit report have a right to—
(1) conduct a supplementary audit of the FS of the company by such person or persons as he may authorise in this behalf; and for the purposes of such audit, require information or additional information to be furnished to any person or persons, so authorised, on such matters, by such person or persons, and in such form, as the CAG may direct; and
(2) comment upon or supplement such audit report.
(d) Any comments given by the CAG upon, or supplement to, the audit report shall be sent by the company to every person entitled to copies of audited FS under section 136(1) and also be placed before the AGM of the company at the same time and in the same manner as the audit report.
(e) Test Audit: For Government Company or Company controlled by SG or CG the CAG may, if he considers necessary, by an order, cause test audit to be conducted of the accounts of such company, without prejudice to the provisions related to Audit and Auditors.
Audit of accounts of branch office of company [Section 143(8)]:
143(8)
(a) Branch office in India: the accounts of that office shall be audited either by:
(A) the company’s auditor appointed under section 139, or
(B) by any other person qualified for appointment as an auditor of the company under section 139.
(b) Branch office outside India:the accounts shall be audited either by:
(A) the company’s auditor or
(B) by an accountant or
(C) by any other person duly qualified to act as an auditor of the accounts of the branch office in accordance with the laws of that country.
(c) The duties and powers of the company’s auditor with reference to the audit of the branch and the branch auditor, if any, shall be as contained in sub-sections (1) to (4) of section 143.
(d) The branch auditor shall prepare a report on the accounts of the branch examined by him and send it to the auditor of the company who shall deal with it in his report in such manner as he considers necessary.
(e) The provisions regarding reporting of fraud by the auditor shall also extend to such branch auditor to the extent it relates to the concerned branch.
143(9)+(10)
Compliance with auditing standards [Section 143(9) and 143(10)]:
(1) Every auditor shall comply with the auditing standards
(2) The Central Government may prescribe the standards of auditing or any addendum thereto, as recommended by the ICAI, in consultation with and after examination of the recommendations made by the National Financial Reporting Authority (NFRA).
(3) It is further provided that until any auditing standards are notified, any standard or standards of auditing specified by the ICAI shall be deemed to be the auditing standards.
143(11)
Additional matters to be reported in case of specified companies [Section 143(11)]: In respect of such class or description of companies, as may be specified in the general or special order by the Central Government, may in consultation with the NFRA direct, the auditor’s report shall also include a statement on such matters as may be specified therein.
Accordingly, CARO 2016 [Companies (Auditor’s Report) Order 2016] is issued in pursuance of Section 143 (11) of Companies Act 2013 for inclusion of the matters specified therein in auditors’ report. CARO 2016 issued by MCA should be complied by the statutory auditor of every company on which it applies.
143(12)-(15)
Reporting of frauds by auditors [Section 143(12)]:
- fraud by employees on company
- report shall be sent to the Secretary, Ministry of Corporate Affairs (MCA) in a sealed cover by Registered Post with Acknowledgement Due or by Speed Post followed by an e-mail in confirmation of the same
- on the letter-head of the auditor(postal address, e-mail address and contact number and be signed by the auditor with his seal and shall indicate his Membership Number
- Form ADT-4.
143(13)
No duty to which an auditor of a company may be subject to shall be regarded as having been contravened by reason of his reporting the matter referred above if it is done in good faith.
143(14)
The provision of this section shall mutatis mutandis apply to a Cost Auditor and a Secretarial Auditor during the performance of his duties under section 148 and section 204 respectively.
143(15)
Penalty for non compliance of section 143(12): If any auditor, CMA, or CS in practice does not comply with the provisions of sub-section (12), he shall-
(a) in case of a listed company, be liable to a penalty of 5 lakh rupees; and
(b) in case of any other company, be liable to a penalty of 1 lakh rupees.
AUDITORS TO SIGN AUDIT REPORTS, ETC. [SECTION 145]
SIGN
(i) 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
(i.e. in case of firm including LLP, only Chartered Accountants are authorised to act as statutory auditors and sign).
(ii) The 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.
PUNISHMENT FOR CONTRAVENTION
PENALTY
officers
auditors
company
Penalty on company [Section 147(1)]:
-sections 139 to 146
-(both inclusive)
-contravened
-25,000 to 5 lacs.
Penalty on officers [Section 147(1)]:
-sections 139 to 146
-(both inclusive)
-contravened
-10,000-1 lac
Penalty on auditor [Section 147(2) & (3)]:
Our Team
- Contravenes-section 139, 144 or 145
- 25,000-5 lacs or four times the remuneration of the auditor, whichever is less.
- knowingly or willfully- intention to deceive
-imprisonment:1 year
-50,000-25 lacs or eight times the remuneration of the auditor, whichever is less.
- refund the remuneration
- pay for damages to the company, statutory bodies or authorities or to members or creditors for loss arising out of incorrect or misleading statements of particulars made in his audit report.
- CG shall notify regulatory body to ensure prompt payment of damages- body shall report to CG.
- audit firm: partners have acted in a fraudulent manner or abetted or colluded in any fraud-liability of the partner of the audit firm and of the firm jointly and severally+447
- in case of criminal liability*-concerned partner who acted in a fraudulent manner shall only be liable.
REMUNERATION OF AUDITORS [SECTION 142]
REMUNERATION
(i) 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.
(ii) In the case of first auditor, remuneration may be fixed by the Board.
(iii) The remuneration mentioned aforesaid 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 the remuneration does not include any remuneration paid to him for any other service rendered by him at the request of the company.
section 141
Eligibility, Qualifications, Disqualifications
of an auditor
QUALIFICATIONS
DISQUALIFICATIONS
(1) A person shall be eligible for appointment as an auditor of a company only if he is a chartered accountant.
It may be noted that a firm whereof majority of partners practising in India are qualified for appointment.
(2) Where a firm including a limited liability partnership is appointed as an auditor of a company, only the partners who are chartered accountants shall be authorised to act and sign on behalf of the firm.
section 141(3) +Rule 10 of CAAR-
(a) a body corporate other than a limited liability partnership registered under the Limited Liability Partnership Act, 2008;
a
(b) an officer or employee of the company;
b
(c) a person who is a partner, or who is in the employment, of an officer or employee of the company;
EXAMPLE
c
Example: Mr. A, a Chartered accountant, is a partner of a firm and has been appointed as an auditor of Laxman Ltd. in the Annual General Meeting of the company held in September 2016, in which he accepted the assignment. Subsequently, in January 2017 he offered B, another Chartered Accountant, who is the Manager Finance of Laxman Ltd., to join the firm of A as a partner.
Answer: Provisions and Explanation: Section 141(3) (c) of the Companies Act, 2013 prescribes that any person who is a partner or in employment of an officer or employee of the company will be disqualified to act as an auditor of a company. Sub-section (4) of Section 141 provides that an auditor who becomes subject, after his appointment, to any of the disqualifications specified in sub-sections (3) of Section 141, shall be deemed to have vacated his office as an auditor.
Conclusion: In the present case, A is auditor of M/s Laxman Ltd and any employee of Laxman Ltd cannot become the Partner of the firm where A is a Partner. In case that happens, he/the firm shall be deemed to have vacated office of the auditor of M/s Laxman Limited.
d
(d) a person who, or his relative or partner -
(i) is holding any security of or interest in the CHSA S-H;
relative may hold security or interest in the company of face value not exceeding Rs.1,00,000.
(also applicable in the case of a company not having share capital).
If acquired by a relative-corrective action shall be taken by the auditor within 60 days of such acquisition or interest.
The following points merit consideration-
(a) face value not the market value.
(ii)The limit not applicable for securities held by an auditor himself or his partner.
In case of an auditor or his partner, securities of even small value shall be a disqualification.
(iii) Grace period of 60 days would not apply to auditor or his partner.
[The term “relative”, as defined under the Companies Act, 2013, means anyone who is related to another as members of a Hindu Undivided Family; husband and wife; Father (including step- father), Mother (including step-mother), Son (including step- son), Son’s wife, Daughter, Daughter’s husband, Brother (including step- brother), Sister (including step- sister).]
(ii) is indebted to the CHSA S-H in excess of ` 5,00,000; or
(iii) has given a guarantee or provided any security in connection with the indebtedness of any third person to CHSA S-H in excess of ` 1,00,000.
(e) a person or a firm who, whether directly or indirectly has business relationship with
the CHSA S-H S-A, of such nature as may be prescribed;
The term “business relationship” shall be construed as any transaction entered into for a commercial purpose, except –
(i) commercial transactions which are in the nature of professional services permitted to be rendered by an auditor or audit firm under the Act and the Chartered Accountants Act, 1949 and the rules or the regulations made under those Acts;
(ii) commercial transactions which are in the ordinary course of business of the company at arm’s length price - like sale of products or services to the auditor, as customer, in the ordinary course of business, by companies engaged in the business of telecommunications, airlines, hospitals, hotels and such other similar businesses.
e
(f) a person whose relative is a Director or is in the employment of the Company as a
director or key Managerial Personnel.
f
g
(g) a person who is in full time employment elsewhere or a person or a partner of a firm holding appointment as its auditor, if such person or partner is at the date of such appointment or reappointment holding appointment as auditor of more than 20 companies other than -
1)one person companies,
2)dormant companies,
3)small companies and
4)private companies having paid-up share capital less than 100 crore.
EXAMPLE
Example: “ABC & Co.” is an audit firm having partners “Mr. A”, “Mr. B” and “Mr. C”, Chartered Accountants. “Mr. A”, “Mr. B” and “Mr. C” are holding appointment as an auditors in 4, 6 and 10 companies respectively.
(i) Provide the maximum number of audits remaining in the name of “ABC & Co.”
(ii) Provide the maximum number of audits remaining in the name of individual partner i.e. Mr. A, Mr. B and Mr. C.
Fact of the Case: In the instant case, Mr. A is holding appointment in 4 companies, Mr. B is having appointment in 6 companies and Mr. C is having appointment in 10 companies. In aggregate all three partners are having 20 audits.
Provisions and Explanations: As per section 141(3)(g) of the Companies Act, 2013, a person shall not be eligible for appointment as an auditor if he is in full time employment elsewhere or a person or a partner of a firm holding appointment as its auditor, if such person or partner is at the date of such appointment or reappointment holding appointment as auditor of more than twenty companies other than one person companies, dormant companies, small companies and private companies having paid-up share capital less than ` 100 crore.
As per section 141 (3)(g), this limit of 20 company audits is per person. In the case of an audit firm having 3 partners, the overall ceiling will be 3 × 20 = 60 company audits. Sometimes, a Chartered Accountant may be a partner in a number of auditing firms. In such a case, all the firms in which he is partner or proprietor will be together entitled to 20 company audits only on his account.
Conclusion:
(i) Therefore, ABC & Co. can hold appointment as an auditor of 40 more companies:
Total Number of audits for which the firm would be eligible = 20*3 = 60
Number of audits already taken by all the partners
In their individual capacity = 4+6+10 = 20 Remaining number of audits available to the firm = 40
(ii) With reference to above provisions, an auditor can hold more appointment as auditor = ceiling limit as per section 141(3)(g)- already holding appointments as an auditor. Hence
(1) Mr. A can hold: 20 – 4 = 16 more audits.
(2) Mr. B can hold 20 - 6 = 14 more audits and
(3) Mr. C can hold 20-10 = 10 more audits.
Note: It has been assumed that the companies given in the question are not one person companies, dormant companies, small companies and private companies having paid-up share capital less than ` 100 crore.
(h) a person who has been convicted by a Court of an offence involving fraud and a period of ten years has not elapsed from the date of such conviction.
h
(i) a person who, directly or indirectly, renders any service referred to in section 144 to the company or its holding company or its subsidiary company.
"directly or indirectly" shall mean -
I
Section 144
Section 144 of the Companies Act, 2013 prescribes certain services not to be rendered by the auditor. 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 (whether such services are rendered directly or indirectly to the company or its holding company or subsidiary company), namely:
It may be noted 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.
(4) Where a person appointed as an auditor of a company incurs any of the disqualifications mentioned in sub-section (3) after his appointment, he shall vacate his office as such auditor and such vacation shall be deemed to be a casual vacancy in the office of the auditor.
141(4)
NFRA RULES
AUDITORS TO ATTEND GENERAL MEETING [SECTION 146]
ATTEND GM
(i) All notices of, and other communications relating to, any general meeting shall be forwarded to the auditor of the company.
(ii) 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.
(iii) The auditor shall have right to be heard at such meeting on any part of the business which concerns him as the auditor.
CG to specify audit of items of cost in respect of certain items (Sec 148)
maintenance
but exclude a company classified as a Micro enterprise or a Small enterprise under MSMED Act, 2006.
Maintenance of Cost Records: Rule 5- every company under these rules including all units and branches thereof, shall, in respect of each of its FY, is required to maintain cost records in Form CRA-1.
The cost records shall be maintained on regular basis in such manner as to facilitate calculation of per unit cost of production or cost of operations, cost of sales and margin for each of its products and activities for every FY on monthly or quarterly or half-yearly or annual basis.
audit
cost auditor
- The audit shall be conducted by a Cost Accountant who shall be appointed by the Board of such remuneration as may be determined by the members in such manner as may be prescribed.
- no person appointed u/s 139 as an auditor of the company shall be appointed for conducting the audit of cost records.
- the auditor conducting the cost audit shall comply with the cost auditing standards issued by the Institute of Cost Accountants of India, constituted under the Cost and Works Accountants Act, 1959, with the approval of the CG.
who?
appoint
written consent of the cost auditor to such appointment & a certificate shall be obtained from him.
The certificate to be obtained from the cost auditor shall certify that the-
(a) the individual or the firm, as the case may be, is eligible for appointment and is not disqualified for appointment under the Companies Act, 2013, the Cost and Works Accountants Act, 1959 and the rules or regulations made thereunder;
(b) the individual or the firm, as the case may be, satisfies the criteria provided in section 141 of the Companies Act, 2013 so far as may be applicable;
(c) the proposed appointment is within the limits laid down by or under the authority of the Companies Act, 2013; and
(d) the list of proceedings against the cost auditor or audit firm or any partner of the audit firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct.
certificate
The cost auditor may be removed from his office before the expiry of his term, through a BR after giving a reasonable OBH to the cost auditor and recording the reasons for such removal in writing.
Form CRA-2 to be filed with the CG for intimating appointment of another cost auditor shall enclose the relevant BR to the effect.
The above provisions shall not prejudice the right of the cost auditor to resign from such office of the company.
remove
remuneration
Any casual vacancy in the office of a Cost Auditor, whether due to resignation, death or removal, shall be filled by the BOD within 30 days of occurrence of such vacancy and the company shall inform the CG in Form CRA-2 within 30 days of such appointment of cost auditor.
casual
vacancy
report
*in Extensible Business Reporting Language (XBRL) format.
The qualifications, disqualifications, rights, duties and obligations applicable to auditors shall, so far as may be applicable, apply to a cost auditor appointed under this section and it shall be the duty of the company to give all assistance and facilities to the cost auditor appointed under this section for auditing the cost records of the company.
The provisions of section 143(12) and the relevant rules on duty to report on fraud shall apply mutatis mutandis to a cost auditor during performance of his functions under section 148 of the Act and these rules.
If any default is made in complying with the provisions of this section,
(a) the company and every officer of the company who is in default shall be punishable in the manner provided in section 147(1);
(b) the cost auditor of the company who is in default shall be punishable in the manner as provided in section 147(2) to (4) .