POWER AND DUTIES OF AUDITOR AND AUDITING STANDARDS
SEC 143(1): This section provides that the auditor of the company shall have the right to have access at all the times to the books of accounts and vouchers of the company , whether kept at the registered place or at some other places of the company. He can obtain all the information and explanations which to the best of his knowledge and belief were necessary for the purpose of his duties as an auditor of the company. The auditor should also enquire about the following things:-
1. Whether loan and advances made by the company on the basis of security are properly secured and the terms and conditions on which it is made are prejudicial to the interest of the company or its members
2. Whether loans and advances made by the company are shown as deposits.
3. Whether personal expenses have been charges to revenue account
4. In case of a company other than banking company or an investment company so much of the assets of the company consists of share , debentures or other securities have been sold at a price less than the price at which these securities are purchased by the company
5. Where it is stated in the books of accounts that shares are issued in cash then whether the cash in respect of these shares have actually been received or not and in case the cash is not received then whether it is clearly shown in the books of accounts or not.
6. Whether the transactions of the company are represented merely by books entries are prejudicial to the interest of the company.
The auditor of the holding company shall have the right to have access to all the records of the subsidiary company also.
Sec 143 (2):
The auditor should make a report to the company on the accounts examined by him and in respect of the financial statement that are required to be laid before the company in general meeting. The report shall be given after taking into consideration the provisions of this act , accounting standards , auditing standards etc.
The auditor report should state the following matters:-
1. Whether he has obtained all the information and explanations which to the best of his knowledge and belief were necessary for the purpose of audit. In case proper information are not received then the details thereof and effect of such information on the financial statement should be stated in the auditor’s report
2. Whether proper books of accounts as required by law is maintained or not and whether proper returns adequate for the purpose of audit have been received from the branches not visited by him or not.
3. Whether the report in respect of a branch which is audited by the auditor other than company auditor has been sent to him
4. Whether the company balance sheet and profit and loss account are in agreement with the books of accounts and returns
5. Whether financial statement comply with the accounting standards
6. The observations and comments of the auditor on the financial transactions or matters which have adverse effect on the company
7. Whether any director is disqualified to be appointed as a director
8. Any qualifications , reservations or adverse remarks in respect of the maintenance of the books of accounts or other matters connected herewith
9. Whether the company has adequate internal financial control system in place and operative effectiveness of such control
10. Whether the company has disclosed the impact of any pending litigation if any in the financial statement
11. Whether the company has made provision in respect of any material foreseeable losses as required by law or accounting standards including the derivative contracts
12. Whether the company has made delay in transferring the amount required to be transferred to the Investor Education and Protection Fund by the company.
Where any of the matters required to be included in the audit report under this section is answered in negative or with a qualification then in that case auditor is required to state the reasons of such reservations and negative remark
In case of Govtcompany the C&AG will appoint the auditor to conduct the audit of the company. The C&AG will also give the directions and the manner in which the accounts of the govt company are required to be audited by the auditor. The auditor then after completing the audit will issue an audit report to the C&AG which will include all the matters which are stated above. In additions to these matters the auditor of the govt company shall state in his audit report the direction issued by C&AG ,the actions taken there upon and the its impact on the accounts and financial statement of the company.
On receipt of audit report of the govt company the C&AG can carry out supplementary audit with 60 days from the date of receipt of such audit report. He may also comment upon the audit report. The audit report should be sent to every person to whom copies of audited financial statement are sent and the copy of such audit report shall also be place at the AGM
In case of Govt Company the C&AG may require that the test audit of the company should be conducted.
Branch is in India ---- The audit of such branch can be done by the Company auditor or by any other person qualified to be appointed as an auditor as per Sec 139
Branch is in some other countries ------ The audit of such branch shall be conducted by an accountant or by any such person qualified to be appointed as an auditor as per the laws of that country.
The branch auditor should prepare a report on the books of accounts of the branch audited by him and send a copy of such audit report to the company auditor.
The auditor shall comply with the accounting standards
The Central Govt may in consultation with the National Financial Reporting Authority direct that the audit report in case of specific classof companies shall include a statement on such matters as may be specified therein.
If an auditor of the company in the course of performance of his duties as auditor has reason to believe that an offence involving fraud is being or has been committed against the company by an officer or the employee of the company then the auditor should immediately report the matter to the central govt within such time and in such manner as may be prescribed.
The auditor should forward his report to the board or the audit committee as the case may be immediately after he comes to know about the fraud seeking their reply or observations within 45 days.
On receipt on such reply or observations of the board or the audit committee the auditor should forward his report along with the reply or observations of the board or the audit committee and his comments on such reply or observations to the central govt within 15 days .
In case no reply or observations has been received by the auditor from the board or the audit committee then in that case the auditor should send the audit report along with a note containing the details of his report that was earlier forwarded to the board or the committee for which he has failed to receive any comments or observations
The provision of this section shall apply to the cost auditor conducting cost audit and the company secretory doing secretarial audit
If the Chartered accountant , company secretary or the cost auditor do not comply with any of the provisions of this act then he will be punishable with a fine which shall not be less than Rs. 1 lakh but which can be extend to Rs. 25 lakh.
Tags Corporate Law