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.
The Bill provides provision for compulsory rotation of individual auditors in every five years and of audit firm every 10 years in the listed company & certain other class of companies, as may be prescribed. A transition period of 3 years from the commencement of this Act has been prescribed for the Company existing on or before the commencement of this Act to comply with the provision of the rotation of auditor.
The Bill also provides that a Company can resolve for rotation of auditing partner and his team within an auditor.
The Bill provides for certain new disqualifications for the Auditors.
The Bill provides that Auditor shall also comply with auditing standards. The Central Government will prescribe the standards of auditing or any addendum thereto, as recommended by the Institute of Chartered Accountants of India, in consultation with and after examination of the recommendations made by the National Financial Reporting Authority.
A duty has been casted on the auditor, to immediately report to the central government, any offence involving fraud which is being or has been committed against the company by officers or employees of the company, which he believe to be committed during the course of performance of his duties as an auditor.
Now the duties, which has been casted on auditor under section 143, shall apply mutatis mutandis to both cost accountant for cost audit and company secretary in practice for secretarial audit. Auditor of the company shall not provide directly or indirectly the specified services to the company, its holding company, subsidiary and associate company In case the auditor contraventions the provisions related to his powers & duties, services that he cannot render and signing and reading of auditor's report at the l general meeting, than in addition to punishment provided in the section, he shall be required to refund the remuneration received by him from the company and shall be liable to pay the damages to the company or to any person for the loss arising out of misleading or incorrect information.
The Bill specifically provides that partner or partners of the audit firm and the firm shall be jointly and severally responsible for the liability, whether civil or criminal as provided in this Act or in any other law for the time being in force. It is proved that the partner or partners of the audit firm has or have acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to or by, the company or its directors or officers, and they shall also be punishable in the manner provided in section 447.
Now, instead of company pertaining to any class of companies engaged in production, processing, manufacturing or mining activities, the central government can only direct cost audit to be conducted in such class of companies engaged in the production of such goods or providing such services, which have the prescribed networth or turnover and who has been directed to include the particulars relating to the utilization of material or labour or to other items of cost as may be prescribed in their books of account. No approval is required of central government for the appointment of cost auditor to conduct the cost audit.