Auditors Under the Companies Act, 2013

Auditors Under the Companies Act, 2013

Understanding the role of auditors, their qualifications, disqualifications, appointment, and rights and duties as governed by the Companies Act, 2013 is crucial for both individuals and businesses engaging with auditing activities. This article is designed to explore these aspects in detail, providing valuable insights into the audit landscape governed by the Companies Act, 2013.

Qualifications

An auditor must meet specific qualifications to be eligible for appointment. They must be a chartered accountant, a cost accountant, or hold a degree from a university recognized by the Central Government under section 440 of the Companies Act. Additionally, they must be eligible for appointment and not disqualified under the Act, the Chartered Accountants Act, 1949, or any rules or regulations made thereunder.

Disqualifications

There are several grounds on which a person may be disqualified from being appointed as an auditor. These include:

• If the person is a director or employee of the company (other than an executive director of a government company), a relative of a director or employee, or an associate company.
• If the person is in full-time employment elsewhere.
• If the person audits more than 20 companies.
• If they have been convicted by a court for fraud and ten years have not passed since the date of such conviction.

Appointment

The Companies Act, 2013 specifies that every company must appoint an individual or firm as an auditor at their first annual general meeting (AGM). This appointment will continue until the conclusion of the sixth AGM. Afterward, the position is filled at the end of every sixth AGM. The manner of selection of auditors by the members of the company at these meetings is determined under rule 4 of the Companies (Audit and Auditors) Rules, 2014.

In case a government company fails to appoint an auditor within the prescribed time frame, it shall inform the members, who shall then appoint an auditor within 90 days after the receipt of such information at an extraordinary general meeting. For non-government companies, if no auditor is appointed or reappointed at any annual general meeting, the existing auditor will continue to be the auditor of the company.

An auditor's term may also be affected by their consent to the proposed appointment and their adherence to applicable conditions and limits set forth by the act.

Rights and Duties

As part of their duties, auditors are required to submit a certificate confirming their eligibility for appointment, that the proposed appointment complies with the prescribed terms and limits in the act, and that no proceedings against them are pending in relation to professional matters of conduct. The auditor has access to all books of accounts and vouchers maintained by the company, including those kept outside the registered office.

Upon completion of their audit, auditors sign the report, which outlines the financial statements and must state that the representations given by the board of directors, as well as the auditor's own findings, give a true and fair view of the company's affairs and comply with relevant accounting standards.

Explore the roles, qualifications, disqualifications, appointment procedures, and rights and duties of auditors as regulated by the Companies Act, 2013. This article provides detailed insights into the audit landscape governed by the Act, essential for individuals and businesses involved in auditing activities.