Audit and Auditor- Companies Act' 2013
Appointment of Auditor-Section 139 Appointment of auditor [Section 139(1)] .Every company shall, at the first annual general meeting, appoint an individual or a firm as an auditor of the company. The auditor shall hold office from the conclusion of 1st annua general meeting (AGM) till the conclusion of its 6th AGMand thereafter till the conclusion of every sixth meeting. A company which is required to constitute an Audit Committee (AC) under section 177 - Audit Committee A Company which is not required to constitute an Audit Committee under section 177 -Board of Directors Responsibilities - . . * Competent Authority (AC & BOD)
.If BOD agrees with AC, it shall further recommend such appointment .If BOD disagrees, it shall refer back to AC for reconsideration and .If AC after considering the reasons, decides not to reconsider, then of individual or firm to members in AGM citing reasons for such BOD shall send its own recommendation and place the matter,b members in AGM .Company shall place the matter relating to appointment for .If appointment is not ratified, then BOD will appoint another .Before appointment*, written consent of auditor is obtained along ratification by members in AGM individual or firm with certificate, certifying that conditions are satisfied (Also Section 141) *appointment includes Reappointment
CONSTITUTION OF AUDIT COMMITTEE .Section 177 of act prescribes, the BOD of every listed co. and following classes shall constitute Audit Committee: All public co. with paid up share capital of 10 crore or more; All public co. having turnover of 100 crore or more or more ** All public co. having in aggregate o/s loans or borrowing debentures or deposits exceeding 50 crore or more CERTIFICATION BY AUD TOR The individual or firm, is eligible for appointment and is not disqualified for appointment under CA Act' 1949 or regulations; The proposed appointment is as per term provided and under the limits laid; The list of proceedings against the auditor or auditor firm or any partner of the firm pending with respect to professional matters, as disclosed are true and correct. . .
TERM OF AUDITOR .Section 139(2) provided that listed co. and other prescribed classes or classes of companies (except OPC and Small companies) shall not appoint or reappoi * An individual as auditor for more than one term of five consecutive years and * An audit firm as auditor for more than two terms of five consecutive years .Rule 5 has prescribed the following classes of companies for u/s 139 * All unlisted public companies having paid up share capital of rupees 10 crore * All private ltd. companies having paid up share capital of rupees 20 crore or * All companies are below threshold of above limits, but having public or more; more, borrowings from Financial Inst., banks or public deposit o more ore or
Cooling Off period - An individual auditor or firm who has completed his term shall not be eligible in the same company. Further, as on date of appointment no audit firm having a common partner or partners to other audit firm, whose term has expired in a compan immediately preceding FY, shall be appointed as auditor of the samfe company for the same company for a period of five years, . Transitional Period Every company existing on or before commencement of this act which is req. to comply with the provisions of this sub-section within a period not later than date of first AGM of company held within a period of 3 years from date of commencement of act.
Example- Cooling off period XYZ Ltd. which is a listed company appoints Mr. Raghav as an auditor in its AGM dated 29th September, 2016. Mr. Raghav will hold office of Auditor from the conclusion of this meeting up-to conclusion of sixth AGM i.e. AGM to be held in the yeat 2021. Now as per sub-section (2), Mr. Raghav shall not be re-appointed as Auditor in XYZ Ltd. for further term of five years i.e. he cannot be appointed as Auditor up-to year 2026 Example- Common Partners M/s Krishna & Associates is an audit firm having 2 partners namely Mr. Krishna and Mr Shyam. Mr. Shyam is also a partner of another audit firm named M/s Kukreja Associates. M/s Krishna & Associates was appointed as the auditors in the company Golden Smith Ltd. for two consecutive periods i.e. from year 2016 t year 2026. Now, if Golden Smith Ltd. wants to appoint M/s Kukreja & Associates as its audit firm, it can not do so because Mr. Shyam was the common partner between-both the Audit firms This prohibition is only for 5 years i.e. upto year 2031. After 5 years Golden Smith it may appoint M/s Kukreja & Associates as its auditors.
Ca Anubhav Jain
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