2. 2
Appointment of Auditors
Clause 139
First auditor to be appointed by Board, within 30 days & if not done, then within 90 in EGM, and
will hold office till conclusion of first AGM.
Subsequent auditors to be appointed at conclusion of first AGM & shall hold office till conclusion
of sixth AGM.
Maximum Tenure- Not more than 1 Term of 5 Years for individual & Not more than 2 Terms of 5 Years
each for Audit Firm.
However, appointment has to be ratified by members at every AGM.
Prior written consent of auditors is required to be taken.
Certificate from auditor that appointment is within the term allowed and within limit and that he
satisfies eligibility conditions in Sec 141.
Co. to intimate auditor of his appointment.
Co. to file notice of auditors appointment with ROC within 15 days of the meeting.
Recommendations of Audit Comm.(if any) to be considered for every auditor appointment(including
casual vacancy).
3. 3
Re-appointment of Auditors, Casual Vacancy & Rotation of Auditors
Clause 139
Retiring Auditor may be re-appointed, if not disqualified for re-appointment, or not expressed his wish
to continue or Special resolution not passed for his re-appointment.
If no auditor is appointed or re-appointed, then existing auditor shall continue.
Casual vacancy to be filled by Board within 30 days, however for resignation by auditor, appointment
to be made in EGM within 3 months of Board recommendation.
Cooling Off Period: An individual auditor or an audit firm can’t be re-appointed as auditor for a period
of 5 years, after completing their term of 5 years & 10 years respectively.
Common Partner Audit Firm: Audit Firm having common partner/s can’t be appointed as auditor, in
cooling off period.
Members of Co. may decide on rotation of auditing partner & his team.
Members may also decide that audit be conducted by more than 1 auditor.
4. 4
Resignation and Removal of Auditors
Clause 140
Resigning auditor shall file Form 10.2 within 30 days from date of resignation with Co. and ROC.
Removal of Auditor- Auditor appointed may be removed from his office, before the expiry of his term
only by a special resolution, after obtaining previous approval of C.G.
Reasonable opportunity of being heard to be given to the auditor being removed.
5. 5
Appointment of Auditor, other than retiring auditor
Special Notice
Clause 140
Special Notice is required for appointing an auditor, other than the retiring auditor in AGM.
Co. shall immediately send that notice to the retiring auditor
Retiring Auditor can make representations
Co. may send the same to members, if possible
If not sent, representations may be read out at the meeting
6. 6
Eligibility of Auditors
Clause 141
He has to be a Chartered Accountant(C.A.)
For an audit firm(including LLP) ,majority of partners practising in India should be qualified C.A.
For an audit firm(including LLP)- only partners who are C.A. shall be authorized to act & sign on
behalf of firm.
7. 7
Disqualification of Auditors
Clause 141
A body corporate other than LLP
An officer or employee of Co.
A person who is a partner or who is in the employment, of an officer or employee of the Co.
A person who, or his relative or partner:
*is holding any security of or interest in the company, its subsidiary, or its holding or associate
company or a subsidiary of such holding company. (Can hold upto Rs. 1 Lakh at Face Value)
*is indebted to the company in excess of Rs. 1 Lakh
*has given a guarantee or provided any security in connection with the indebtedness of any third
person to the company in excess of Rs. 1 Lakh.
8. 8
Disqualification of Auditors- Continued
A person or a firm who, whether directly or indirectly, has business relationship with Co.
Person whose relative is a director or is in the employee or KMP
A person/partner who is in full time employment elsewhere and holds appointment as auditor in
more than 20 companies
A person who has been convicted by a court of an offence involving fraud and a period of 10 years
has not elapsed
Any person whose subsidiary or Audit Comm. or any other form of entity, is engaged as on the date
of appointment in consulting & specialised services as per section 144.
Note:“business relationship” shall construe any transaction entered into for a commercial purpose except those which are in the
nature of professional services as permitted to be rendered by an auditor under the Act and the Chartered Accountants Act and
the rules and the regulations made under such Act.
9. 9
Remuneration of Auditors
Clause 142)
Remuneration of first auditor shall be fixed by the Board
Remuneration of other auditors to be fixed in its general meeting.
Remuneration shall also include the expenses, if any, incurred by
• Auditor in connection with audit
• But doesn’t include any remuneration paid to him for any other service rendered by
him at the request of the Co.
10. 10
Powers of Auditors
Clause 143
Right to access books of accounts & vouchers of the company at all times
Right to ask for such information & explanation as he may consider necessary to enquire on the below
matters:
• Whether loans & advances made have been properly secured
• Whether personal expenses have been charged to revenue account
• Whether transactions of the Co. which are represented merely by book entries are prejudicial to the
interests of the Co.
• Whether loans and advances made by the company have been shown as deposits
• Whether cash has actually been received for the shares allotted & if no cash has been received,
whether the position as stated in the accounts is not misleading
11. 11
Audit Report
Clause 143
Matters to be covered in the Report will be as follows:
Whether he has obtained all the information & explanations to the best of his knowledge
Whether proper books of accounts as required, have been maintained
Whether report on accounts of branch office has been maintained
Whether the Co’s B/S & P/L account dealt with are in agreement with the books of accounts & returns
Whether in his opinion, financial statements comply with accounting standards
observations or comments of the auditors on financial transactions have any adverse effect on the
functioning of the company
Whether any director is disqualified from being appointed as a director
Any qualification or adverse remark relating to the maintenance of accounts and other matters
connected therewith;
Whether Co. has adequate internal financial controls system
12. 12
Auditor not to render certain services
Clause 144
Auditor shall provide only such other services as
approved by the Board, but which shall not
include any of the following services:
Accounting
and book
keeping
services;
Internal audit
Design &
implementati
on of any
financial
information
system
Actuarial
services
Investment
advisory
services
Investment
banking
services
Rendering of
outsourced
financial
services
Management
services
13. 13
Auditor to sign Audit Reports
Clause 145
Auditor of Co. shall sign & certify the auditor’s report
New Concept - Qualifications, observations which have any adverse effect on the functioning of the
Co. mentioned in the auditor’s report shall be read before the company in general meeting and shall
be open for inspection by any member of the Co.
14. 14
Auditors to attend General Meeting
Clause 146
All notices of, and other communications relating to, any
GM shall be forwarded to the auditor of the company
Auditor to mandatorily attend the meeting himself or
through his authorised representative who shall also be
qualified as an auditor
Auditor shall have the right to be heard at such meeting
on any part of the business which concerns him as the
auditor.
Now, if the Audit Report is not qualified, it need not be
read at the AGM
