The subsequent auditor or auditors are appointed by the members in annual general meeting by passing an ordinary resolution.eval(ez_write_tag([[300,250],'lawtimesjournal_in-box-4','ezslot_7',113,'0','0'])); Sometimes, in certain cases, an audit committee has to be constituted under Section 177 of the Act and all appointments of auditors shall be made based upon the recommendation of the Audit Committee[viii].To give effect to the requirements of Section 139(11), the Companies (Audit and Auditors) Rules 2014 lay down the manner and procedure of selection and appointment of auditors[ix]. S ection 44AB provides that, if a person is required by or under any other law to get his accounts audited, then he need not again get his accounts audited to comply with the requirement of section 44AB. Correspondingly a firm of limited liability partnership is appointed as the auditor, only those partners that are chartered accountants are authorized to act and sign on behalf of the firm[xxiv]. The auditor may make any statement or explanation with regard to the accounts as he may deem fit. For the purposes of the audit, the auditors will bind the shareholders. Thus, Section 141(2) of Companies Act states that if a firm is appointed as an auditor, only those partners who are chartered accountants are authorized to sign on behalf of the firm. Your company must have an audit if at any time in the financial year it’s been: Don’t include personal or financial information like your National Insurance number or credit card details. Where, during the course of his audit, he comes across circumstances which arouse his suspicion, he should decide whether a fraud, in fact, does exist, and if so, whether it would be sufficiently material to affect his opinion on the accounts he is auditing. The request must arrive at least one month before the end of the financial year that the audit is being asked for. Audit required under law This type of audit is also known as statutory audit. Section 2(17) defines a chartered accountant as “a chartered accountant who holds a valid certificate of practice under sub-section (1) of section Chartered Accountants Act, 1949”. A company carries on huge businesses based on the capital which has been provided by someone else who are not in the day to day management of the company. This has been done to ensure that the auditor’s independence and objectivity is not compromised because of the fees earned by him by rendering other services to the company for which he is acting as an auditor. These include accounting and book keeping services, internal audit; design and implementation of any financial information system; actuarial services; investment advisory services; investment banking services; rendering of outsourced financial services; management services; and any other kind of services as may be prescribed. Broadly, the auditor has been seen through the lens of an agent and an officer of the company.eval(ez_write_tag([[336,280],'lawtimesjournal_in-banner-1','ezslot_12',115,'0','0'])); An auditor acts as an agent of the shareholders. You can change your cookie settings at any time. However the Chartered Accountants Act, 1949 also permits the chartered accountants to enter into partnership with other professionals. He is expected to safeguard their interests. Don’t worry we won’t send you spam or share your email address with anyone. To help us improve GOV.UK, we’d like to know more about your visit today. Detection of frauds and errors is only an incidental objective. The auditor has the right to attend any general meeting and be heard, at any general meeting which he attends, on any part of the business which concerns him as auditor[xxvi]. The term ‘vouchers’ includes all documents, correspondence, agreements, etc., which support any of the transactions or data disclosed in the financial statements, directly or indirectly. Persons like company or co-operative society are required to get their accounts audited under their respective law. The auditors of a company: Even if your company is usually exempt from an audit, you must get your accounts audited if shareholders who own at least 10% of shares (by number or value) ask you to. EU audit legislation 5 The definition of a PIE was included in the Statutory Audit Directive (2006). You’ve accepted all cookies. Some companies must have an audit even if they meet the rules for not having one. The Companies Act, 2013 has provided a wide array of rights to the auditor to ensure that he is able to discharge his duties effectively. In, However, this position has changed with the. Further, it is obligatory that any qualifications, observations or comments on the financial transactions or matters which have any adverse effect on the function of the company mentioned in the auditor’s report be read at the general meeting and also shall be open to inspection by any member of the company[xxvii]. Even if a company is exempt due to the above an audit may be required if members with 10% of a class of shares request an audit. Within fifteen days of the meeting in which the auditor is appointed, the company shall inform the auditor concerned and also file a notice of such appointment with the Registrar, The auditor is expected to continue in office till the annual general meeting is actually held thus, if adjourned, his tenure will extend till the conclusion of the adjourned meeting. Hence, the accountant has to adopt the same procedures of audit as prescribed under Auditing and Assurance standards - AASs while certifying … 37, [xxii] Rule 12 of the Companies (Audit and Accounts) Rules, 2014, [xxx] Newton v. Birmingham Small Arms Co. [1906]2 Ch. They are usually appointed by the company and must have a Chartered Accounts Degree. All notices and such other communications shared between members regarding the general meeting of a company, shall also be forwarded to the auditor of the company[xxv]. They would, therefore, would like to see that their investments are safe, are being used for intended purposes and the annual accounts of the company present a true and impartial account of the state of affairs of the company. Law Times Journal: One-Stop Destination for Indian Legal Fraternity. The notice to Registrar about appointment of auditor is required to be given in Form ADT-1 of the Companies (Audit and Auditors) Rules, 2014 as amended vide Notification F.No. Thus, if a firm or LLP has partners who are not chartered accountants, they are not authorized to sign the auditor’s report. The new (2014) PIE definition includes1: 1. In case of a Government company or a company owned or controlled by the Central Government, State Government or in part, the first auditors shall be appointed by the Comptroller and Auditor-General of India within sixty days from the date of registration of the company. Practical Law's employees are not practising solicitors or barristers. Every auditor of company has a right of access at all times to the ‘books’, ‘accounts’ and ‘vouchers’ of the company. Thus, although an auditor is an agent of the shareholders and according to the law of agency ‘the knowledge of the agent is the knowledge of the principal’, the shareholders are not bound for any information which the auditor might have acquired during the course of audit if he had not communicated it to the shareholders. To enable this, the accounts of the company must be inspected and reviewed in a timely manner by  an independent individual who is not employed in the company or is in any way indebted or otherwise obliged to the company. The audit under section 44AB aims to ascertain the compliance of various provisions of the Income-tax Law and the fulfillment of other requirements of the Income-tax Law. You’ll need to get an audit if your articles of association say you must or your shareholders ask for one. However, this position has changed with the Companies (Amendment) Act, 2000 coming into force. Similarly if at an annual general meeting no auditor is appointed or reappointed, the existing auditor shall continue to be the auditor of the company. Even the new act of 2013, the term ‘officer’ given in section 2(59) does not include auditor. Every company shall, at the first annual general meeting, appoint an individual or a firm as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting and thereafter till the conclusion of every sixth meeting, Sometimes, in certain cases, an audit committee has to be constituted under, The Audit Committee recommends the name of the auditor to the Board. The company must not be part of a group that does not qualify as it includes ineligible companies under the previous point. Thus, accounts of the branch office of the company are required to be audited cither by the company’s auditor or by any other person qualified for appointment as an auditor[xxi]. Section 139(6) lays down that the first auditor or auditors of a company shall be appointed by the Board of directors within thirty days of the date of registration of the Company. The auditor also has right to send his authorized representative to attend the meeting instead of attending the meeting himself personally. All the companies registered under the Companies Act, 1956, whether public or private and whether having a share capital or not are required maintaining proper books of accounts under Section 209 of the Companies Act, 1956. Broadly, the auditor has been seen through the lens of an agent and an officer of the company. Thus, the first view of the auditor being a agent of the company seems to be compliant with the existing law of the land. 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