An attempt has been made to summaries important provision by making points of newly enacted Companies Act, 2013 which has get accent of President on 29th August, 2013. Provisions related to Audits are covered under CHAPTER X of new Companies Act, 2013. MCA has also notified Rules made under Companies Act, 2013 known as “The Companies (Audit and Auditors) Rules,2014 and be effective from 01.04.2014.
Important Points are summarized as under:
Sec.139: Appointment of Auditors
Points covered under this section are as under:
1. First Auditor
2. Reappointment of Auditor
3. Casual Vacancy arising in office of Auditor
4. Appointment in Government Companies
5. Additional Points
Now look in to some more brief:
1. First Auditor
First auditor is to be appointed by the Board of Directors within thirty days from the date of Registration of the company.
If the company fails to appoint such first auditor within period specified then Board will inform to the members who in turn appoint first auditor within ninety days at an Extraordinary General Meeting (EGM).
The first auditor shall hold office till the conclusion of the First Annual General Meeting.
2. Re Appointment of Auditors
The auditor or the firm who or which is eligible for re-appointment.
If the auditor is not appointed or re-appointed at any Annual General Meeting, then the existing auditor shall continue be the auditor of the company.
A retiring auditor may be re-appointed at an annual general meeting, if—
-- he is not disqualified for re-appointment;
-- he has not given the company a notice in writing of his unwillingness to be re-appointed;
And
-- a special resolution has not been passed at that meeting appointing some other auditor or providing expressly that he shall not be re-appointed.
(Above three conditions are required to be fulfilled simultaneously)
3. Casual Vacancy arising in office of Auditor
Casual vacancy can be created in the office of the Auditor. This can be either due to any of the below reason:
a. Death of an auditor
b. Resignation of Auditor before completion of tenure
c. Any other reason
Casual vacancy can arise in following two cases:
Case – I : A company whose accounts are required to be audited by an auditor appointed by Comptroller and Auditor General of India And
Case – II: A company whose accounts are not required to be audited by an auditor appointed by Comptroller and Auditor General of India
CASE - I
The appointment in case of casual vacancy can be filled up by Board of Directors within thirty days when such vacancy is due to reason other than that of resignation.
The appointment in case of casual vacancy can be filled up by Board of Directors within thirty days and such appointment has also been approved by the company at a General Meeting which must be convened within three months of recommendation of the Board.
Such an auditor will hold the office till the conclusion of the next annual general meeting.
CASE - II
The appointment in case of casual vacancy can be filled up by the Comptroller and Auditor General of India within thirty days.
When such vacancy is not filled up by the C & AG of India then such appointment can be made by Board within next thirty days.
4. Appointment in Government Companies
First Auditor:
In the case of a Government company or any other company owned or controlled, directly or indirectly, by the Central Government, or by any State Government, or Governments, or partly by the Central Government and partly by one or more State Governments, the first auditor shall be appointed by the Comptroller and Auditor-General of India within sixty days from the date of registration of the company.
In case the Comptroller and Auditor-General of India does not appoint such auditor within the said period, the Board of Directors of the company shall appoint such auditor within the next thirty days.
In the case of failure of the Board to appoint such auditor within the next thirty days, it shall inform the members of the company who shall appoint such auditor within the sixty days at an Extraordinary General Meeting(EGM), who shall hold office till the conclusion of the first annual general meeting.
Re-appointment of Auditor:
In the case of a Government company or any other company owned or controlled, directly or indirectly, by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, the Comptroller and Auditor-General of India shall, in respect of a financial year, appoint an auditor duly qualified to be appointed as an auditor of companies under this Act, within a period of one hundred and eighty days from the commencement of the financial year, who shall hold office till the conclusion of the annual general meeting.
5. Additional Points:
Following are the additional points which are required to be kept in mind:
1. No company can appoint an auditor for a period of more than five consecutive years.
2. The said period of five years is of ten years in case where there is an appointment of firm.
3. It is to be noted that before such appointment or reappointment is made, the written consent of the auditor to such appointment or reappointment, and a certificate from him or it that the appointment or reappointment, if made, shall be in accordance with the conditions as may be prescribed, shall be obtained from the auditor.
4. The certificate shall also indicate whether the auditor satisfies the criteria provided in Section 141 (Eligibility, Qualifications and Disqualifications of auditors)
5. The company shall inform to the auditor regarding appointment or reappointment and also file a notice of such appointment with Registrar within fifteen days of meeting in which auditor is appointed
6. Every company, existing on or before the commencement of this Act which is required to comply with provisions of this sub-section, shall comply with the requirements of this sub-section within three years from the date of commencement of this Act.
7. Members of the company either resolve regarding rotation of auditing partner of firm or audit shall be conducted by more then one auditor.
8. The Central Government may prescribe rules regarding the manner in which the companies shall rotate their auditors.
9. Where a company is required to constitute an Audit Committee under section 177, all appointments, including the filling of a casual vacancy of an auditor under this section shall be made after taking into account the recommendations of such committee.
10. Rotation of Auditors is compulsory under Companies Act,2013 and rules made thereunder.
I have tried to write in very easy language. If you find across any mistake then you can write to me. I would like suggestions...Thanks...!!!
You can write me at chirag_sheth1313@yahoo.co.in or at cachirag1313@gmail.com
CAclubindia
