Audit of Limited Companies

-Company Auditor
Qualifications of an Auditor of
a Limited Company
A person shall not be qualified for appointment
as an auditor of a company (public or private)
unless he is a chartered Accountant within the
Charted Accountants Act, 1449,Section- 226.
According to section 226(2), a person who holds a
certificate under the Restricted Auditors
Certificate (Part B States) Rules, 1956, is also
qualified to act as auditor of a company.
However, the Central Government may by
notification in the Official Gazette make rules
providing for the grant, renewal, suspension or
cancellation of such certificates and may
prescribe conditions and restrictions for such
purpose [Section 226 (2) b.]
Disqualifications
The Companies act, Section 226 (3), lays
down that none of the following persons
are qualified for appointment as
auditors of a company-
a) A body corporate;
b) An officer or employee of the company;
c) A person who is a partner, or who is in
the employment of the officer or
employee of the company;
d) A person who is indebted to the
company.
e) A person holding any security (i.e.,
voting right) of the company.
Appointment of Auditors
1. First Auditor
2. Subsequent Auditors
3. Auditors of Government
Companies
4. Appointment by Special
Resolution
5. Casual Vacancies
6. Branch Auditor
Remuneration and Expenses
of an Auditor
1. If the auditor has been appointed by the Board of
Directors, it is the Board which fixes his
remuneration.
2. If the auditor has been appointed by the Central
Government under the circumstances mentioned
above, the central Government fixes his
remuneration.
3. In case, the auditor is appointed by the controller
and auditor general, the remuneration shall be
fixed company in general meeting.
4. If the auditor has been appointed by the
shareholders at the general meeting, it is the
company which determines his remuneration
unless the company in general meeting may
delegate the power of fixing his remuneration to
5. The retiring auditor who is automatically
re-appointed at the annual meeting,
unless a resolution is passed refixing his
remuneration, is entitled to get the same
remuneration as he was getting
previously.
6. If an auditor is asked to do any other
work over and above his normal work of
audit, e.g., preparing the final accounts or
income–tax returns, he is entitled to get
extra remuneration.
Rights and Powers of an Auditor
1. Right of access to books of account
2. Right to call information and explanations
3. Right to receive notice of and attend
general meeting
4. Right to make statement at the general
meeting
5. Right to indemnified
6. Right to visit the branches
7. Right to take legal and technical advice
8. Right to remuneration
9. Right to sign the audit report
10. Right of lien
Duties of an Auditor
1. Duty to make report
2. Matters to be stated in the report
3. Duty to assist Investigator
4. Duty to call for information on
various points
5. Duty to certify the Statutory Report
6. Duty to certify profit and loss
account in a prospectus