Audit under Audit under Companies Companies Act,1956Act,1956

CA. Aseem Trivedi,FCACA. Aseem Trivedi,FCA

Company AuditCompany Audit Appointment of AuditorAppointment of Auditor Removal Of AuditorRemoval Of Auditor Qualifications and Disqualifications of Qualifications and Disqualifications of

AuditorAuditor Rights of AuditorRights of Auditor Duties of AuditorDuties of Auditor Auditor’s ReportAuditor’s Report Branch AuditBranch Audit Special AuditSpecial Audit Divisible Profits and DividendsDivisible Profits and Dividends

Appointment of AuditorAppointment of Auditor

Appointment of auditorAppointment of auditor

First Auditor

Subsequent Auditor

Section 224(1)

Section 224(5)

First Auditor is appointed First Auditor is appointed by BODby BOD

Sec. 224(5) Appointment of Sec. 224(5) Appointment of First AuditorFirst Auditor

(5) The (5) The first auditorfirst auditor or or auditorsauditors of a of a companycompany shall shall be be appointed by the appointed by the Board of directorsBoard of directors within within one monthone month of of the the date of registrationdate of registration of the company; and the auditor of the company; and the auditor or auditors so appointed shall hold offices until the or auditors so appointed shall hold offices until the conclusion of the first annual general meeting: conclusion of the first annual general meeting:

Provided that-Provided that-

(a) ….. (a) …..

(b) if the (b) if the Board fails to exercise its powersBoard fails to exercise its powers under this under this sub-section, the sub-section, the company in general meetingcompany in general meeting may may appoint the first auditor or auditors. appoint the first auditor or auditors.

Subsequent Auditor –in Subsequent Auditor –in AGMAGM

S. 224(1)Appt. of S. 224(1)Appt. of Subsequent AuditorSubsequent Auditor

Every companyEvery company shallshall, , at each annual general at each annual general meetingmeeting, , appoint an auditor or auditorsappoint an auditor or auditors to hold to hold office from the conclusion of that meeting until the office from the conclusion of that meeting until the conclusion of the next annual general meetingconclusion of the next annual general meeting and and shall, within seven days of the appointment, give shall, within seven days of the appointment, give intimation thereof to every auditor so appointed intimation thereof to every auditor so appointed

3[Provided that before any appointment or re-3[Provided that before any appointment or re-appointment of auditor or auditors is made by any appointment of auditor or auditors is made by any company at any annual general meeting a written company at any annual general meeting a written certificate shall be obtained by the company from certificate shall be obtained by the company from the auditor or auditors proposed to be so the auditor or auditors proposed to be so appointed to the effect that the appointment or re-appointed to the effect that the appointment or re-appointment, if made, will be in accordance with appointment, if made, will be in accordance with the limits specified in sub-section (1B).] the limits specified in sub-section (1B).]

If Company Fails to appoint If Company Fails to appoint auditor in AGM?auditor in AGM?

3) Where at 3) Where at an annual general meeting an annual general meeting no auditors are appointed or re-no auditors are appointed or re-appointedappointed, the , the Central GovernmentCentral Government may may appoint a person to fill the vacancy. appoint a person to fill the vacancy.

(4) The company shall, within seven days (4) The company shall, within seven days of the Central Government's power under of the Central Government's power under sub-section (3), becoming exercisable, sub-section (3), becoming exercisable, give notice of that fact to that give notice of that fact to that Government; and, if a company fails to Government; and, if a company fails to give such notice, the company, and every give such notice, the company, and every officer of the company who is in default, officer of the company who is in default, shall be punishable with fine which my shall be punishable with fine which my extend to [five thousand rupees]. extend to [five thousand rupees].

Lets SummariseLets Summarise

Whether First auditor

appointed by board Within ione

month

yes

NoShare holders

will appoint the same in their EGM

Lets SummariseLets Summarise

Whether auditor

appointed by AGM

yes

NoCentral Govt. Will Appoint the Auditor

Casual Vacancy in the office Casual Vacancy in the office of the auditorof the auditor

Section 224(6) Casual Section 224(6) Casual VacancyVacancy

(6) (a) The Board may fill any casual vacancy (6) (a) The Board may fill any casual vacancy in the office of an auditor; but while any such in the office of an auditor; but while any such vacancy continues, the remaining auditor or vacancy continues, the remaining auditor or auditors, if any, may act: auditors, if any, may act:

Provided where such vacancy is caused by the Provided where such vacancy is caused by the resignation of an auditorresignation of an auditor, the vacancy shall , the vacancy shall only be filled by the company in general only be filled by the company in general meeting. meeting.

(b) Any auditor appointed in a casual vacancy (b) Any auditor appointed in a casual vacancy shall hold office until the conclusion of the shall hold office until the conclusion of the next annual general meeting. next annual general meeting.

Appointment by Special Appointment by Special ResolutionResolution

Appointment by Special Appointment by Special ResolutionResolution

Section 224ASection 224A (1) In the case of a company in which (1) In the case of a company in which not less than twenty-not less than twenty-

five per centfive per cent of the of the subscribed share capitalsubscribed share capital is held, is held, whether whether singly or in any combinationsingly or in any combination, by-, by-

(a) (a) a public financial institutiona public financial institution or a or a Government companyGovernment company or or Central GovernmentCentral Government or or any State Government, orany State Government, or

(b) any financial or other institution established by any (b) any financial or other institution established by any Provincial or State Act in which a State Government holds Provincial or State Act in which a State Government holds not less than fifty-one per cent of the subscribed share not less than fifty-one per cent of the subscribed share capital, orcapital, or

(c) (c) a nationalised banka nationalised bank or an or an insurance companyinsurance company carrying carrying on on general insurance business,general insurance business,

the appointment or re-appointment at each annual general the appointment or re-appointment at each annual general meeting of an auditor or auditors shall be made by a meeting of an auditor or auditors shall be made by a special special resolutionresolution..

And if SR fails?And if SR fails?

(2) Where any company referred to in sub-(2) Where any company referred to in sub-section (1) omits or section (1) omits or fails to pass at its fails to pass at its annual general meeting any special annual general meeting any special resolution appointing an auditor or resolution appointing an auditor or auditors, it shall be deemed that no auditors, it shall be deemed that no auditor or auditors had been appointed by auditor or auditors had been appointed by the company at its annual general the company at its annual general meeting, and thereupon the provisions of meeting, and thereupon the provisions of sub-section (3) of section 224 shall become sub-section (3) of section 224 shall become applicable in relation to such company.applicable in relation to such company.

Other Consideration- Other Consideration- Intimation to ROCIntimation to ROC

(1A) Every auditor (1A) Every auditor appointed appointed under sub-section (1),under sub-section (1), shall shall within within thirty daysthirty days of the receipt of the receipt from the company of the from the company of the intimation of his appointment, intimation of his appointment, inform the Registrar in writinginform the Registrar in writing that he has that he has accepted or refused accepted or refused to acceptto accept, the appointment.] , the appointment.]

Removal of AuditorRemoval of Auditor

Removal of auditorRemoval of auditor

Before Expiry of the term

After Expiry of the Term

First Auditor

224(5)

Other Auditor

224(7)

AnyAuditor

224(2)

Removal of first auditor Removal of first auditor 224(5) provisio224(5) provisio

Provided that-Provided that-(a) the company (a) the company maymay, , at a general at a general meetingmeeting, , removeremove any such auditor or all or any such auditor or all or any of such auditors and appoint in his or any of such auditors and appoint in his or their places any other person or persons their places any other person or persons who have been nominated for appointment who have been nominated for appointment by any member of the company and of by any member of the company and of whose nomination notice has been given to whose nomination notice has been given to the members of the company not less than the members of the company not less than fourteen days before the date of the fourteen days before the date of the meeting; andmeeting; and

Removal of Subsequent Removal of Subsequent AuditorAuditor

Except as provided in the proviso to Except as provided in the proviso to sub-section (5),sub-section (5), any auditor appointed any auditor appointed under this section may be removed under this section may be removed from office from office before the expiry of his before the expiry of his termterm only by the company only by the company in general in general meetingmeeting, , after obtaining the previous after obtaining the previous approval of the Central Governmentapproval of the Central Government in that behalf. in that behalf.

Removal After Expiry of the Removal After Expiry of the term Section 224(1)term Section 224(1)

Subject to the provisions of sub-section (1B) and section 224ASubject to the provisions of sub-section (1B) and section 224A at at any annual general meeting,]any annual general meeting,] a a retiring auditor, by whatsoever retiring auditor, by whatsoever authority appointed, shall be re-appointed,authority appointed, shall be re-appointed, unless- unless-

(a) he is (a) he is not qualifiednot qualified for re-appointment; for re-appointment;

(b) he has (b) he has given the company notice in writinggiven the company notice in writing of his of his unwillingnessunwillingness to be re-appointed; to be re-appointed;

(c) a (c) a resolution has been passed at that meeting appointing resolution has been passed at that meeting appointing somebody insteadsomebody instead of of him or providing expressly that he shall not him or providing expressly that he shall not be re-appointed; orbe re-appointed; or

(d) where notice has been given of an (d) where notice has been given of an intended resolutionintended resolution to to appoint some person or persons in the place of a retiring auditor, appoint some person or persons in the place of a retiring auditor, and by reason of the and by reason of the death, incapacity or disqualification of that death, incapacity or disqualification of that personperson or of all those persons, as the case may be, the resolution or of all those persons, as the case may be, the resolution cannot be proceeded with. cannot be proceeded with.