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Secretarial Audit

Appointment, Removal & Role of an Auditor Under Companies Act 2013

The appointment, removal, and function of an auditor under the Indian Companies Act 2013 has been discussed in this article. It is important to understand the role of an auditor for your company as there are many implications and repercussions for each position.

What Is the Appointment, Removal and Role of an Auditor in Companies Act 2013?

The appointment, removal and role of an auditor in companies under the Indian Companies Act 2013 depends on a variety of factors such as the business type of company and the audit requirement. Generally, an auditor is appointed by the company’s board of directors or shareholders to audit the financial statements and other related documents of the company. The auditor is also responsible for performing other types of audits, such as external audits. The auditor’s appointment, removal and role may be affected by various factors, such as a change in management or ownership of the company.

Why Are Auditors Required?

Auditors are required under the Indian Companies Act to audit and report on the financial and legal affairs of a company. This includes looking at the company’s accounts, making sure that the company is complying with applicable laws and regulations, and assessing the company’s compliance with Generally Accepted Accounting Principles (GAAP). Auditors are also responsible for providing advice to the company’s board of directors on ways to improve its financial situation. They can also recommend changes to the company’s operating procedures or management. Auditors can also provide guidance on how to deal with potential financial problems. Auditors play an important role in protecting shareholders of a company by ensuring that the company is operating in a proper manner. They can also help to prevent a crisis from happening by providing early warning signs.

What Are the Qualifications for Appointment as an Auditor?

  • An auditor must have qualifications prescribed by the regulations. These qualifications may include being a chartered accountant, a professional accountant or a certified public accountant
  • The appointment of an auditor is subject to the approval of the directors of the company
  • The auditor has a duty to report any suspected irregularity to the directors and the appropriate government authorities.

How Do Auditors Obtain Authorisation to Act on Behalf of or for a Company or Other Person in Relation to Their Work?

An auditor is authorised to act on behalf of or for a company or other person in relation to their work by obtaining an authorisation from the registrar. This authorisation may be granted in one of two ways:

  • By issuing a letter of appointment to the auditor, which specifies the tasks that the auditor is authorised to perform on behalf of the company and any other person
  • By issuing a letter of authorisation, which specifies only the tasks that the auditor is authorised to perform on behalf of the company.

A company may also authorise an auditor to remove himself or herself from any particular engagement with the company or any other person. This authorisation can be given in one of two ways:

  • By issuing a letter of removal, which specifies the dates on which the auditor will no longer be engaged with the company and any other person
  • By issuing a declaration of independence, which states that the auditor will no longer act as an agent or representative of either party in relation to their work for the company.

What Are the Duties of an Auditor?

An auditor is responsible for conducting an independent audit of a company’s financial statements and other related documents. The auditor’s job is to ensure that the company is reporting accurate information about its finances and operations. Auditors also have the responsibility of ensuring that all required laws and regulations are followed by the company they are auditing. They may also recommend changes or adjustments to the company’s business practices for investment. An auditor’s job is highly important, as poor financial reporting can lead to financial instability for a company. Auditors are essential in protecting the interests of both shareholders and the public.

Who Can Be Appointed as an Auditor and What Are the Penalties for Breaching the Provisions of the Act

Under Indian Companies Act, the appointment of an auditor is governed by section 228. The section provides that an auditor can be appointed only by a company’s board of directors or by a resolution of the company’s shareholders. A company cannot appoint its own auditor.The auditor must be registered with the registrar of companies and must satisfy certain qualifications such as being a member of the Institute of Chartered Accountants of India (ICAI) or having equivalent professional qualifications.

An auditor who fails to comply with any of the provisions of section 228 may be guilty of an offence and liable to a fine or to imprisonment for a term not exceeding three years, or both. A company that appoints an auditor in contravention of any provision of section 228 shall have its appointment voided and its authority to engage an auditor terminated.There are also penalties for breach of clause 3.2 which states that an auditor must render an annual report on the financial position, performance and cash flow of the company to the board and shareholders at least six months before the end of the financial year in which it is made. If this report is not complied with, then the company will be fined.

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