 Who is an Auditor?

Any individual trained to review and verify accounting data

and recognised as a Chartered Accountant (CA) under the
Chartered Accountant Act 1949 is deemed to be an auditor.

 What is the purpose for the appointment of the Auditor?

The purpose of the auditors in the company is to protect the
interests of the shareholders. The auditor is obligated by law to
examine the accounts maintained by the directors and inform
them of the true financial position of the company. Auditor
gives his independent opinion to the owners or shareholders of
the company to protect and keep the company in a safe
financial condition.
AUDIT & APPOINTMENT OF OVERVIEW
AUDITORS AUDITORS
Section 139

APPOINTMENT OF FIRST AUDITOR: Every company shall, at the first

annual general meeting, appoint an individual or a firm as an auditor who
shall hold office from the conclusion of that meeting till the conclusion of
its sixth annual general meeting and thereafter till the conclusion of
every sixth meeting .

The company shall place the matter relating to such appointment for
ratification by members at every annual general meeting.

Before the appointment is made, the written consent of the auditor to such
appointment, and a certificate from him or it that the appointment, if made,
shall be in accordance with conditions as may be prescribed. The certificate
shall also indicate whether the auditor satisfies the criteria provided in S.
141.

No audit firm having a common partners or partners whose tenure has

expired immediately preceding financial year shall be appointed as auditor
of the same company for a period of five years.
AUDIT & APPOINTMENT OF COMPARISON
AUDITORS AUDITORS
Section 139

New provisions introduced in Companies Act 2013

Compulsory rotation of auditors by listed companies and

classes of companies as may be prescribed.

a)Individual auditor – not more than 1 term of 5

consecutive years
b)Audit firm including LLP – not more than 2 terms of 5
consecutive years
c)During the cooling period ( of 5 years) even any audit
firm having one or more common partners with the audit
firm being rotated is not eligible to be appointed auditor
of the same company.
SCHEME OF NOTIFICATION UNDER COMPANIES ACT
SCHEME OF NOTIFICATION UNDER COMPANIES ACT
SCHEME OF NOTIFICATION UNDER COMPANIES ACT

No of consecutive years for Maximum No. of Aggregate period which the

which an individual auditor consecutive years for which auditor would complete in
has been functioning as he may be appointed in the the same company in view
auditor in the same same company of column I and II
company
5 years ( or more than 5 years) 3 years 8 years or more

4 years 3 years 7 years

3 years 3 years 6 years

2 years 3 years 5 years

1 year 4 years 5 years

AUDIT & APPOINTMENT OF COMPARISON
AUDITORS AUDITORS
Section 139

Companies Act 2013 Companies Act 1956

S. 139 Appointment of Auditors S. 224 Appointment and
remuneration of auditors
S. 619 Application of sections 224
to 233 to Government Companies

New provisions introduced in Companies Act 2013

Time bound appointment or reappointment of auditors by CAG for Govt.

Companies. If the members do not appoint auditor within 60 days from
the date of registration, the Board can appoint within next 30 days

Where company constitutes an Audit Committee as required under this

Act, all appointments, including filling of a casual vacancy of an auditor
shall be made after taking into consideration the recommendations of
such committees.
 Powers
1. Right to access :Every auditor of a company shall have right to
access at all time to book of accounts and vouchers of the company.
The Auditor shall be entitled to require from officers of the company
such information and explanation as he may consider necessary for
performance of his duties. There is an inclusive list of matter for
which auditor shall seek information and explanation. The list
includes issues related to: (a)   Proper security for Loan and advances,
(b)  Transaction by book entries,(c)   Sale of assets in securities in
loss,(d)  Loan and advances made shown as deposits,(e)  Personal
expenses charged to revenue account,(f)    Case received for share
allotted for cash.The auditor of holding company also has same
rights.

2. Auditor to sign audit reports :The auditor of the company shall sign
the auditor’s report or sign or certify any other document of the
company and financial transactions or matters, which have any
adverse effect on the functioning of the company mentioned in the
auditor’s report shall be read before the company in general meeting
and shall be open to inspection by any member of the company.
3.Auditor in general meeting:It is a prime requirement under
section 146, that the company must send all notices and
communication to the auditor, relating to any general
meeting, and he shall attend the meeting either through
himself or through his representative, who shall also be
an auditor. Such auditor must be given reasonable
opportunity to speak at the meeting on any part of the
business which concerns him as the auditor.
4. Right to remuneration:The remuneration of the auditor of
a company shall be fixed in its general meeting or in such
manner as may be determined therein. It must include the
expenses, if any, incurred by the auditor in connection
with the audit of the company and any facility extended
to him but does not include any remuneration paid to him
for any other service rendered by him at the request of
the company.
5. Consent of auditor:As per section 26, the company must
mention in their prospectus the name, address and
consent of the auditors of the company.
 DUTIES
1. Make report:The auditor shall make a report to the members of the
company on accounts examined by him on every financial statement and
shall state:(a)   Whether he has sought and obtained all the necessary
information and explanations,(b)  Whether proper books of account have
been kept,(c)  Whether company’s balance sheet and profit and
loss account are in agreement with books of accounts and returns.

2. Audit report of Government Company :The auditor of the government

company will be appointed by the Comptroller and Auditor-General of
India and such auditor shall act according to the directions given by
them. He must submit a report to them which should include the action
taken by him and impact on accounts and financial statement of the
company.The Comptroller and Audit – General of India shall within 60
days of receipt of the report have right to (a) conduct a supplementary
audit and (b) comment upon or supplement such audit report.The
Comptroller and Audit – General of India may cause test audit to be
conducted of the accounts of such company.
3. Liable to pay damages:As per section 245, the depository and
members of the company have right to file an application before the
tribunal if they are of the opinion that the management or conduct of
the affairs of the company are being conducted in a manner
prejudicial to the interests of the company.They also have right to
claim damages or compensation from the auditor for any improper
or misleading statement made in his audit report or for any
fraudulent or unlawful conduct.
4. Branch Audit :Where a company has a branch office, the accounts
of that office shall be audited either by the auditor appointed for the
company, or by any other person qualified for appointment as an
auditor of the company. The branch auditor shall prepare a report on
the accounts of the branch examined by him and send it to the
auditor of the company who shall deal with it in his report in such
manner as he considers necessary.
5. Auditing Standards :Every auditor shall comply with the auditing
standards. The Central Government shall notify these standards in
consultation with National Financial reporting Authority. The
government may also notify that auditors’ report shall include a
statement on such matters as notified.
6. Fraud Reporting :If an auditor of a company, in
the course of the performance of his duties as
auditor, has reason to believe that an offence
involving fraud is being or has been committed
against the company by officers or employees of
the company, he shall immediately report the
matter to the Central Government within such
time and in such manner as may be prescribed.
7. Winding up:As per section 305, at the time of
voluntary winding up of a company it is a
mandatory requirement that auditor should
attach the copy of the audits of the company
prepared by him.
 Rights
1. Right of Access Books of Accounts: As per Section 227(1) of the
Companies Act every auditor of the company has the right to
access at all times to the books of accounts and vouchers of the
company, whether kept at the head office of the company or
elsewhere. 
2. Right to Obtain Information and Explanations: An auditor can
call for any information or explanation from different officers of
the company which he may think necessary for the performance of
his duties.
3. Right to Receive Notices and Other Communication Relating
to General Meetings and to attend them: According to section
231, of the companies act an auditor of a company has the right to
receive notices and other communications relating to the general
meetings in the same way as that of the members of the company.
4. Right to Visit Branches: According to section 228 of the companies act the
auditor of the company has the right to visit the branch office or offices of the
company.
5. Right to Correct Any Wrong Statement: The company auditor is required to
make a report to the members of the company on the accounts examined by him
of the final accounts and the related documents which are laid down before the
company in the general meeting.
6. Right to sign the Audit Report: As per section 229 of the companies act only the
person appointed as auditor of the company or where a firm is so appointed, only
a partner in the firm practicing in India, may sign the audit report or authenticate
any other document of the company required by law to be signed.
7. Right to Being Indemnified: Under Section 633 of the Companies
Act, an auditor is considered to be an officer of the company and he
has the right to be indemnified out of the assets of the company
against any liability incurred by him in defending himself against
any civil and criminal proceedings by the company if it is proved
that the auditor has acted honestly or the judgment is delivered in his
favour.
8. Right to seek Legal and Technical Advice: The company
auditor has the full right to seek the opinion of the experts and
to take their legal and technical advice so as to discharge his
duties efficiently.

9. Right to Receive Remuneration: As per Section 224(8) of the

Companies Act, the company auditor has the right to receive
remuneration provided he has completed the work which he
has undertaken to do so.