Statutory Audit

hi !

Statutory Audit is compulsory for every Company under the Companies Act, 1956. Please see Sec. 216 of the Companies Act.

Vinod

Hi Tanvi,

Statutory Audit of accounts is compulsory for all types of companies

All the companies registered under the Companies Act, 1956, whether public or private and whether having a share capital or not, are required to maintain proper books of accounts under Section 209 of the Companies Act, 1956. Companies have also to get their Books of accounts audited as required under section 224 of the Act.

APPOINTMENT OF AUDITORS

Section 224 governs the appointment of auditors. The auditors are to be appointed by the shareholders of the company in an annual general meeting by passing an ordinary resolution. However, special resolution is required to be passed when section 224A comes into play. First auditors are to be appointed by the Board of directors within one month of the date of registration of the company as per section 224(5).

A casual vacancy in the office of auditor can be filled up by the Board of directors but where the casual vacancy is caused by the resignation of auditor such vacancy is to be filled up by the company in general meeting as per section 224(6).

REASON OF AUDIT OF ACCOUNTS

The shareholder are the owners of the company and invest their money in the company. However management of the company's business lies in the hands of the directors. The shareholders generally lack the specialised skills required to understand the financial statement. Also the shareholders have no power to examine the books of accounts of the company.Thus, in order to protect the interest of the shareholders audit of accounts has been made compulsory.

Audit of accounts ensures that affairs of the company are carried out properly and financial statement gives a true and fair view.

 What are the provisions for "Statutary Audit of a company being conducted by a relative of a director"

Statutary Audit of a company being conducted by a relative of a director is not advisable at all. As such position or relation may adversely affect the independence of Auditor.

There is no boundation in this regard upon the auditor or the company, as per the companies act. But the CA Regulation Act, forbids CA's to undertake such audits. Also Guidance Note On Independence Of auditors, issued by ICAI forbids the same