PRACTICES OF AUDITING (ACM 303)

APPOINTMENT OF AUDITOR(According To Section 139 of Companies Act,2013 )

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QUALIFICATION OF AUDITOR { ACC. TO SEC (141) }

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DISQUALIFICATION OF AN AUDITOR( ACC TO SEC. 143 )Auditors relative being director or KMP.

An employee/officer of the company.

Convicted for 10 years.

Auditor in more than 20 companies.

A body corporate other than LLP registered under the LLP act, 2008.

A person whose relative is in the employment of the company as a director or key managerial person.

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EXAMPLEMr Amit, a practicing CA, is holding securities of X ltd. Having a face value of rupees 200. Whether Mr Amit is qualified for appointment as an auditor or not?

As per sec 143(d), an auditor is disqualified to be appointed as an auditor if he, or his relative or partners holding any security of or interest in the company or its subsidiary.

In the present case, Mr A is holding security of rupees 200 in the X ltd., Therefore he is not eligible for appointment as an auditor.

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Company appoint an auditor at the first annual general meeting who hold office for next 5 year till the conclusion of 6th AGM.

Every year in the AGM ratification by shareholder is required.

EXPLANATION: For the purposes of this chapter, appointment include re-appointment.SUB SEC (1)

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RULE 4 OF COMPANIES ( AUDIT & AUDITORS) RULES,2014The auditor appointed shall submit a certificate to registrar that :-

The individual or firm is eligible for appointment under the CA act,1949 and the rules & regulation made thereunder.

The list of proceeding against the auditor pending with respect to professional matter of conduct is true & correct.

The proposed appointment is as per the term provided under the act.

The list of proceeding against the auditor pending with respect to professional matter of conduct is true & correct

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SUB SEC (2)

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RULE 5 OF COMPANIES (AUDIT & AUDITORS) RULES,2014

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SUB SEC (3)Member of a company may resolve to provide that:-

(A) in the audit firm appointed by it, the auditing partner & his team shall be rotated as such interval as may be resolved by member ;or

(B) the audit shall be conducted by more than one auditor.

SUB SEC (4)The central govt. May, by rules, prescribe the manner in which the companies shall rotate their auditor in pursuance of sub sec(2).

The word firm shall include a limited liability partnership

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RULE 6 OF COMPANIES (AUDIT & AUDITORS RULES, 2014The audit committee shall recommend to the board, the name of an individual auditor or of an audit firm who may replace the incumbent auditor on expiry of the term of such incumbent.

Where a company is required to constitute an audit committee, the board shall consider the recommendation of such committee, and in other cases, the board shall itself consider the matter of rotation of auditor and make its recommendation for appointment of next auditor in next AGM.

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SUB SEC (5)In the case of a govt. Company or any other company owned or controlled, directly or indirectly, by the central govt. And partly by one or more state govt. , The comptroller & auditor general of India shall, in respect of a financial year, appoint as an auditor of companies under this act, within a period of 180 days from the commencement of the financial year , who shall hold office till the conclusion of the annual general meeting.

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SUB SEC (6)

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EXAMPLEManaging director of ABC ltd. Himself want to appoint Mr Mehra, a practicing CA as the first auditor of the company.

PROVISION & EXPLANATION :- According to sec 139(6) of the companies act 2013 the first auditor of a company shall be appointed by the board of directors within 30 days of registration of company . in the instant case, the appointment of Mr Mehra as an first auditor is violation of sec 139(6).

CONCLUSION :- The M.D. Of ABC ltd. Have no right to appoint the first auditor of a company.

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SUB SEC (7) { IN CASE OF GOVERNMENT COMPANIES }

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EXAMPLEThe first auditor of ABC ltd. ,A govt. Company, was appointed by the board of directors.

PROVISION & EXPLANATION :- Acc. To section 139 (7), first auditor shall be appointed by comptroller & auditor general of India within 60 days.

CONCLUSION :- Thus, the appointment of first auditors made by the board of directors of abc ltd. Is void.

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SEC 139(8) [ CASUAL VACANCY TO BE FILLED BY ]

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SUB SEC (9)

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SUB SEC (10)Where at any general meeting no auditor is appointed or reappointed, the existing auditor shall continue to be the auditor of company.

SUB SEC (11)Where a company is required to constitute an audit committee under sec 177, all appointments, including the filling of casual vacancy of an auditor. Under this section shall be made after taking into accounts of recommendation of such committee.

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THANK YOU..

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