Audit of Companies

8/14/2019 Audit of Companies

1/28

5 DECEMBER 09 www.afterschool.tk 1

Audit of companies in India rules andprocedure

by :

DR. T.K. JAIN

AFTERSCHOOL

centre for social entrepreneurship

sivakamu veterinary hospital road

bikaner 334001 rajasthan, indiaFOR PGPSE PARTICIPANTS

mobile : 91+9414430763


2/28


What is audit ?

Examination of accounts and records to ensurethat they are correct and give proper

information


3/28


What should be qualification of

auditor ?

As per 226(1) : CA as per CA Act 1949

as per 226(3) he should not be company,employee of the company, partner of the

company being audited, debtor of the company

being audited for more than Rs. 1000, or aperson holding voting right in that company


4/28


First auditor

First auditor is appointed by Directors in 1month of date of registration of the company.This auditor works till first AGM, thereafter

AGM will appoint auditor


5/28


Number of audits a CA can

undertake?

A CA can undertake maximum 30 audits(including private companies) in a year


6/28


Procedure of appointment of

auditor

Company to inform the CA about it in 7 days,

CA to give consent in 30 days in form no. 23B


7/28


How to appoint an auditor ?

Special notice of 14 days, with names of theauditor to be appointed

a copy of notice has to be sent to members,directors, retiring auditor etc.


8/28


Casual vacancy ?

It can be filled by board of directors.But when this vacancy is due to resignation,

then only AGM can fill this vacancy.

If there are more than 1 auditor, other auditorscan continue their work on resignation by one

of them.


9/28


Remuneration ....

To be fixed by the AGM

in case of govt. Comapanies, appointment isdone by CAG (comptroller and auditor

general) but remuneration is fixed byshareholders.


10/28


Reappointment of auditor ?

Sec. 224 (2) yes, an auditor can be reappointed,unless, he is unwilling, or unable, or

disqualified, or a resolution has be put for his

removal.


11/28


Does appointment of auditor

require special resolution?

No,

but in some cases yes - when govt. /scheduled banks / insurance companies /

financial institution is holding 25% capital in a

company, the appointment must be by spcialresolution (otherwise the government will

appoint).


12/28


Rights of auditor ?

Sec. 227 ;

he can access accountshe can obtain information and explanation

attend AGM and be heard

receive remunerationvisit branch offices


13/28


Duties of auditor

Sec. 227 :

make audit reportmake adequate disclosure,

attend audit committee meeting of directors

give reasons for qualificationssign the audit report


14/28


Audit of branches

When you will set up branches of yourbusiness all over India / world, then you may

appoint one auditor for all the branches or youmay appoint separate auditors for each branch,

but these auditors must be qualified (as percompany law of that country / India). The

branch auditor shall send his report to the mainauditor. The main auditor can visit the branch

also.


15/28


Special audit (sec. 233A)

The government can order for spcial audit -

when it thinks that the company is not properlymanaged or its affairs need to be examined,

Such auditor will submit his report to the

government covering all the aspects as coveredin sec. 227 + the matters given by thegovernment


16/28


Cost audit 233 B

They undertake verification of cost accounts,

and ensure that cost accounting principles arefollowed :

as per sec. 209 (1)d and 224 (1b) such audit is

done by ICWA / qualified cost auditorcost auditor is appointed by board of directors(with approval of government in some cases)


17/28


Inspection

Inspection is different from audit it is orderedunder sec. 209A.


18/28


Who will order for inspection ?

Registrar

SEBI

other government executives authorised forthis


19/28


Why inspection?

To identify correctness of accountsto ascertain whether statutory auditors have

discharged their duties

to detect miapplication of fundsto detect misuse of funds


20/28


Powers of inspectors ?

Powers equal to Civil Court (discovery &production of books of accounts, summons,enforcing attendance, inspection of books ,

registers etc. )

has the powers of registrar of companies if

doing as per Sec. 234 (inspection on order ofregistrar)

can copy books / mark the books of accounts


21/28


Report of inspection

The inspector will report to Registrar ofcompanies + Ministry of company affairs or

SEBI


22/28


Actions on inspection report

Upon receipt of inspection report, followingactions may be taken up : 1. investigation

under sec. 235

special audit u/s 233A

appointment of govt. Directors 408

or other actions


23/28


Powers of registrars

Can call for documents (sec. 234, 235)

investigation (by government) as per sec. 239,

237, 247)


24/28


Can members (shareholders)

apply to govt for investigation?

As per sec. 235(2) 200 shareholders with

minimum 1/10th of capital can apply forinvestigation of a company

if a company doesnt have shares, then 1/5th

members can applygovt can also order for investigation on special

resolution by company or on order by court


25/28


Powers of investigators

They can examine affairs of related companies

ask for production of documents and for oath

seize documents


26/28


Report by investigators

Sec. 241 : they will submit report to CLB asper 235 / court as per 237


27/28


Action on default

Wind up : 243

actions as per criminal laws 242

recovery of damages 244further investigations of other companies (247)

expenses of investigation (245) by govt, to be

recoverable from the convictemployess are protected (sec. 635B)

freezing of voting rights etc. As per sec. 250


28/28


THANKS....

GIVE YOUR SUGGESTIONS AND JOINAFTERSCHOOOL NETWORK / START

AFTERSCHOOOL SOCIALENTREPRENEURSHIP NETWORK IN

YOUR CITY

[email protected]

PGPSE WORLD'S MOSTCOMPREHENSIVE PROGRAMME IN

SOCIAL ENTREPRENEURSHIP
mailto:[email protected]:[email protected]

Audit of Companies

Documents