• Sec 226 of companies act 1956 , that a person shall not be qualified as an auditor of the company unless he/she is a chartered accountant holding a certificate of practice with in the meaning of the chartered accountants act 1949, and also any firm in which all the partners practicing in India are qualified for appointment as auditors of a company

Disqualification of an auditor
• • • • • • • • The fallowing entities or persons have been declared disqualified to be appointed as an auditor of a company A body corporate An officer or employee of the company A person who is a partner or who is in the employment of an officer or employee of the company A person indebted to the company for an amount exceeding Rs.1000 Who has given any guarantee in connection with the indebt ness of any third person A person holding any security of the a company after one year from the date of commencement of the company A person not possessing the chartered accounting certificate

Appointment of auditor
• The auditor of the company should be appointed by the board of directors with in the month of the date of registration of the company by passing a resolution such auditor can hold office till the conclusion of the first annual general meeting How ever the company has the power to remove the auditor by giving 14 days notice and nominate another auditor at a general meeting Where the board fails such an auditor the company in GM may appoint the first auditor

Subsequent auditors
• Every company at each GM may appoint auditors to hold office from the conclusion of the next annual GM . The company should give intimation of the appointment to the auditor with in 7 days of the appointment. Every auditor so appointed at an AMG should with in 30 days of the receipts the intimation from the company, inform the registrar of companies in writing his acceptance or refusal of appointment The board of directors is authorized to fill any casual vacancy excepting a vacancy arriving out of resignation which is to be filled only by the company in the Gm

Other appointments
• Sec 224 a, provides that a company in which 25% or more share capital is held by government company or b government it self the appointment of an auditor shall be made by a special resolution. If the company fails by a pass special resolution . It shall be deemed that no auditor had been appointed by the company at its GM and the central Government will be empowered to make the appointment

Appointment by central government
• In case no auditors are appointed or reappointed u/s annual general meeting, the central government may appoint a person to fill the vacancy . The central government has the power to fix the remuneration of auditor appointed by it and paid by the company. It is the duty of the company to inform the central government about the fact that no auditor has been appointed , with in 7 days of the AGM Failure to give notice to the Central Government will make the company and every officer in default liable to a fine extending to Rs.5000/-

Reappointment of an auditor
• As per sec 224(2) an auditor may be reappointed
• • • • at AGM , except in four cases namely 1. where he is not qualified for reappointment His unwillingness to re appointment Resolution passed at AGM to appoint someone instead of him Death, incapacity, or disqualification of that person

Ceiling on audit
• According to 224 –propose o break the evil of continue association of C.A”s prating as auditors singly or in firms, with groups of companies so that they may not have any temptation to shield the short coming s of the management from the share holders An auditor of firm of auditors can be auditor for 20 public companies sand also any number of private companies as they may like

Removal of auditors
• The company is empowered to remove him any time before the expiry of this term by passing a resolution at a general meeting and with prior approval of the central government (not applicable to first auditor)

Tenure of appointment
• An auditor appointed at the AGM can hold office from he conclusion of the meeting to the conclusion of next AGM . If AGM is adjourned he will hold office until the conclusion of such meeting

Remuneration of auditors
• The remuneration shall be fixed by the company in AGM (except appointed by the Central Government and in all other cases) • Remuneration classified • As auditor • As adviser • Otrher amount paid in any other manner

Rights of auditors
• Right to call for information and explanation • Right to have books of accounts • Right to notices of and to attend meetings • Inspection of articles , other than accounting books • Right to remuneration

Duties of auditor
• • • • Scrutinize loans and advances Securitize entries Scrutinize investments Scrutinize expenses

Auditors liability for negligence
• An auditor has to render his services with care, skill and diligence and according to GAAP, standards of performance. He may be field liable for any careless or reckless act done by him • Re, VS London and general bank Leeds estates co vs. shepherded

Auditing of braches
• Only the company at gm can take a decision whether the accounts of the branch should be audited by the companies auditor or by a person other than the companies auditor

• If the opinion of the central government
• The affairs of the company are not being managed in accordance with sound business principle or prudent commercial practices Management of the company to cause serious injury or damage to the interest of the trade, industry or business in which it operates The financial position of the any company is such as to endanger its solvency then it may order5 for a special audit of the company's accounts for a special period the expenses incurred by the auditor will be determined buy the CG and paid by the company

Qualification in auditor
• When an auditor gives an opinion subject to certain reservations, he is said to have given a qualified opinion . In a qualified opinion , the auditors states that the financial statements reflect a trued and fair view subject to certain reservations. A qualification should always be preceded by the words “subject to”