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RG - A Helping Hand (Company Secretary)     23 July 2011

Audit Provisions for Govt Companies !!!

 

Hi All,

 

I found this information on net and wanted to share with you all. Please check

 

 

Government Companies

 

 

Section-617 – Government Companies

(1)   Any company in which not less than 51% of the paid-up share capital is held by:

(i)           The CG, or

(ii)         One or more State Governments.

(iii)       Partly by CG and partly by one or more State Governments.

(2)   A subsidiary of a Govt. Company shall also be treated as a Govt. Co.

[Note: Paid-up Capital = ESC + PSC]

 

Audit of Government Companies

Ø  U/S 619(2), the auditor of a Govt. Co. shall be appointed or re-appointed by the Central Government on the advice of C&AG.

Ø  Ceiling limit applies.

Ø  The C&AG of India has power to direct the manner in which the accounts of Government companies are to be audited and to issue instructions to the auditor in regard to  any matter  relating to the performance of his duties and functions.

Ø  Remuneration of Auditor shall be fixed by the Shareholders in general meeting (GM). Alternatively, the GM may determine the manner in which the remuneration shall be fixed.

Ø  Powers of CAG

ü  To direct the manner in which the accounts shall be audited.

ü  To give instructions to the auditor regarding conduct of the audit, and

ü  To appoint a person to conduct a Supplementary or Test Audit.

Ø  Audit Report

ü  The auditor of Government Company shall submit a copy of his audit report to the C&AG who shall have the right to comment upon or supplement the audit report in a manner he thinks fit.

ü  Any such comments or supplement shall be placed before the AGM of the company at the same time and in the same manner as the audit report.

ü  However, while preparing the Board’s Report, the Board is not required to give any information or explanation in respect of comments or supplement made by C&AG, since there is no requirement u/s217 or any other provision of the Act.

Note: The First Auditor and Branch Auditor of a Govt. company shall also be appointed by C&AG. The provisions of Section-233B (Cost Audit) shall also apply to Govt. Companies.

 

Section-619A – Annual Report on Government Companies

Ø  The CG, where it is a member of a Govt. Co. shall cause an annual report on the working and affairs of that company to be prepared within 3 months of its AGM whereas, the audit report is placed u/s 619(5).

Ø  As soon as this annual report is prepared the Central Government shall also cause it to be laid before both Houses of Parliament together with the copy of the audit report and comments on, or supplement to the audit report made by the C&AG.

Ø  Where, in addition to CG, any State Government is also member of the Govt. Co., that State Government shall cause a copy of the annual report (prepared as aforementioned) to be placed before the House or both Houses of the State Legislature, together with a copy of the  audit report and the comments thereon or supplement thereto.

Ø  The provisions of Section-619A shall also apply to a Govt. Co. in liquidation.

 

Section-619B – Applicability of provisions relating to Audit of Govt. companies to certain companies: -

Ø  Section-619B provides some other companies, in which the provisions of Section-619 will apply [i.e., Auditor shall be appointed or reappointed by Comptroller and Auditor General of India (C&AG)]

Ø  Accordingly, the provisions of Section-619 apply to a company in which not less than  51%  of  the paid-up share capital is held by  one or more of the following or any combination thereof: -

ü  The Central Government and one or more government companies;

ü  Any State Government or Governments and one or more government companies;

ü  The Central Government and one or more State Governments and one or  more  government companies;

ü  The  Central  Government and one or more corporations owned or controlled by the Central Government;

ü  The Central Government, one or more State Governments and one or more corporations owned or controlled by the Central Government;

ü  One or more corporations owned or controlled by the Central Government or the State Government;

ü  More than one government company;

Ø  The auditor of such a company shall be appointed by the Comptroller and Auditor General of India(C&AG).

 

Key Note

Ø  The removal of the auditor of Govt. Companies shall also be done by the C&AG.

Ø  Some examples of corporations owned or controlled by the Central Government are: -

ü  LIC, UTI, IDBI.

ü  Nationalized Banks.

ü  Any other body corporate established under a separate Act of Parliament.

 

 

Section-620 – Power of CG to modify the Act relating to Government Companies

Ø  The CG may, by notification in the Official Gazette, direct that any of the provisions of the Act, (with  the exceptions of Sections 618, 619 and  619A) either shall not  at all, or shall, subject to such exceptions, modifications and adaptations as maybe specified, apply to a Government company.

Ø  But the power of the Central Government aforementioned is not an unfettered one; it is subject to the control of Parliament.

 

 

Q. 55% SC of a company is held by LIC and IDBI. Is it a Govt. Co.?

Ans. No, coz., no share of the company is held by Central or State Govt. therefore the company is not a Govt. Company. However Section-619B will apply here.

 



 2 Replies

S .Ghosh

S .Ghosh (audit assistant)     30 July 2014

good article

Vivek Shrestha

Vivek Shrestha (Articleship)     21 December 2017

is this a book???


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