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APPOINTMENT OF 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.

COMPULSORY ROTATION: Provisions 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 members of a company can resolve for rotation of auditing partner and also for audit to be conducted by more than auditor. (Clause 139)

Where a company constitutes an Audit Committee, all appointments including the filling of a casual vacancy of an auditor shall be made after taking into account the recommendations of Audit Committee.

NUMBER OF AUDIT LIMIT: A person at the time of appointment or reappointment is holding appointment as a auditor of MORE THAN TWENTY COMPANIES shall not be eligible for appointment. (Clause 141(3) (g))

In case, LLP is appointed as auditor only chartered Accountants is allowed to act and sign on behalf of the firm. Clause 141(2) Multidisciplinary partnership is allowed. Proviso to Clause 141(1)

FRAUD REPORTING: 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 believes to be committed during the course of performance of his duties as an auditor.

AUDITING STANDARDS: Central Government will 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 NFRA. (Clause143)

ANNUAL GENERAL MEETING: The Auditor unless otherwise exempted by the company shall attend any general meeting by himself or through his representative. (Clause 146)


Auditor of the company shall not provide services as per list given below to:

a. the company, holding company, or subsidiary directly or indirectly

b. indirectly includes through relative, connected or associated person, or other entity over which individual has significant influence or control, or whose name or trade mark or brand is used by the individual Clause 147


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.

PUNISHMNET: In case the auditor contravenes the provisions related to his powers & duties, provide services given under Clause 144 then 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.

It is specifically provided 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.

If 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 Clause 447.


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