Ease to understand law for CA student

3. The Companies Act, 2013, enacted on 29th August, 2013
on accord of Hon’ble President’s assent, has the
potential to be historic milestone, as its aim to improve
corporate governance, simplify regulations, and enhance
the interests of investors. The new law was replaced
nearly 60-year-old Companies Act, 1956.

4. Companies Act, 2013 contains follows :
• Chapter I to XXVII
• The Act has 470 sections
• It applies to the whole of India

5. Chapter X contain following :

Appointment of Auditors.

Removal, resignation of auditors and special notice.

Eligibility, quality and disqualifications of Auditors.

Remuneration of auditors.

Powers and duties of auditors and ASs.

Restrictions on certain services.

Auditors to sign audit reports.

Attend general meeting

Punishment for contravention.

CG to specify audit of item of cost in respect of certain companies.

6. Section 139 - Appointment of Auditors.
Appointment of the first auditor -
• Other than Government Company the BOD appoint within 30 days of
incorporation of company, if fails to appoint then member shall appoint
within 90 days at the EGM.
• Government Company the CAG appoint within 60 days of
incorporation of company, if fails to appoint then BOD shall appoint
within next 30 days, if BOD also fails to appoint then members can
appoint within 60 days from intimation from BOD about failure to
appoint.
 Company should inform the auditor concerned of his or its appointment and
file notice of appointment with registrar within 15 days of the meeting

7. Section 139 - Appointment of Auditors.
Appointment of the subsequent auditor –
 The written consent and certificate from auditor at every AGM.
 Government Companies
-Within 180 Days from 1st April
 Non-Government Companies
-To hold office till conclusion of 6th AGM (subject to
rectification by members at every AGM)

8. Section 139 - Appointment of Auditors.
 Auditor can be appointed as individual / Audit Firm
 Audit firm also including LLP incorporated under LLP Act, 2008
Audit Tenure for auditor and audit firm
 For all the company appointment period maximum up to for
individual; one term of 5 consecutive years and for audit firm; two term
of 5 consecutive years.
Cooling off period 5 years before next appointment.

9. Section 139 - Appointment of Auditors.
Retiring auditor may be reappointed at AGM if –
1. He is not disqualified for reappointment.
2. He has not given the company a notice in writing of his
unwillingness to be re-appointed; and
3. A special resolution has not been passed at that meeting appointing
some other auditor or providing expressly that he shall not be reappointed.
 No audit firm having a common partner/partners to other audit firm
whose tenure has expired in a company immediately preceding the
financial year.

10. Section 139 - Appointment of Auditors.
Filling of casual vacancy
• In case of non Government Company vacancy shall be filled by BOD
within 30 days, but such vacancy is as a result of the resignation of an
auditor, such appointment shall also be approved by the company at a
general meeting convened within 3 months of the recommendation of
the Board and he shall hold the office till the conclusion of the next
annual general meeting.
• In case of Government Company vacancy shall be filled by CAG within
30 days. If CAG does not fill the vacancy within the period, BOD shall fill
the vacancy within next 30 days.

11. Section 140 - Removal, resignation of auditors and special
notice.
 Before expiry of term removed from his office by to passing
special resolution after obtaining previous approval of CG.
 Auditor who has resigned shall file within 30 days from the
date of resignation
 Non compliance of Section 140(2) punishable with fine Rs.
50,000 to 5,00,000
 Special notice shall be required for appointing a person as
auditor other than a retiring auditor.
 The Tribunal is empowered to change the auditor of a
Company in case of any fraudulent activities by auditor.

12. Section 141 - Eligibility, quality and disqualifications of Auditors.
 Eligibility and qualification of Auditors
• A CA within the meaning of the CA Act, 1949 may be appointed as an
auditor. Only a CA holding a CP can be appointed as an auditor.
• A firm where of all the partners practicing in India are qualified for
appointment may be appointed by its firm name to be the auditor of a
company.
• Where a firm including a LLP is appointed as an auditor of a company,
only the partners who are CA shall be authorized to act and sign on
behalf of firm.

13. Section 141 - Eligibility, quality and disqualifications of Auditors.
 Disqualification of auditors
• Body corporate other than LLP Act, 2008.
• Officer or employee of the company;
• A person who is a partner, or who is in the employment, of an officer
or employee of the company;
• A person who, or his relative or partner falling under 141(3)(d) (i.e.
persons holding any security or any interest in the company or its
subsidiary of such holding company) is disqualified for appointing as an
auditors.

14. Section 141 - Eligibility, quality and disqualifications of Auditors.
• Person or firm who directly or indirectly has business relationship
with the company or its subsidiary, holding or subsidiary of such
holding company or associate company .
• A person whose relative is a director or is in the employment of the
company as a director or key managerial personnel.
• 10 years not yet elapsed of convicted by court of an offence.
• If person who provides services to company which prescribed under
section 144.
• A person who is in full time employment elsewhere or a person or a
partner of the firm holding appointment as its auditor.

15. Section 142- Remuneration of auditors
 The remuneration of the auditor of a company shall be fixed in its
general meeting or in such manner as may be determined therein:
Provided that the Board may fix remuneration of the first
auditor appointed by it.
 The remuneration shall in addition to the fee payable to an
auditor, 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.

16. Section 143 – Powers & duties of auditors & Auditing
Standards
Powers and Right of Auditor.
 Auditor have right to access all time books of accounts kept at any
place on his tenure of audit. Auditor have also entitled to get
explanation form any officer of the company and amongst other inquire
into following matters, namely; which they have been made are
prejudicial to the interest of the company or its member ;• Loan and advances made on the basis of securities and properly
secured.
• Transactions of the company which are represent merely by book
entries.
• Non investment or non banking company which have more
investment as an assets and sold less than purchase price.

17. Section 143 – Powers & duties of auditors & Auditing
Standards
Powers and Right of Auditor.
• Whether loans and advances made by the company have been
shown as deposits.
• Whether personal expenses have been charged to revenue
account.
• where shares allotted for cash; whether cash has actually been
received or no, whether position of the books of account and
balance-sheet is correct, regular and not misleading.
 Holding company’s auditor also have right to access all subsidiary
company for its consolidated financial statement.

18. Section 143 – Powers & duties of auditors & Auditing
Standards
Duties of auditors
 Duty to make report to the member of the company on the accounts
examined by him.
 The audit report shall also state;
• Details of obtained information and the effect of such information on the
financial statements.
• Examination of those books required by law and proper returns adequate
for the purpose of his audit have been received from branches not visited by
him.
• Report on account of Branch office.
• Comply with Accounting standards.
• Any adverse effect on the functioning of the company.

19. Section 143 – Powers & duties of auditors & Auditing
Standards
Duties of auditors
 In case of govt. company auditor so appointed shall submit report to
CAG and CAG have right to conduct on a supplementary audit within 60
days from the date of receipt of report.
 Every auditor shall comply with the auditing standard issued by ICAI
support with CG and NFRA.
 If any officer or employee has been committed any fraud against his
company then auditors duty to immediately report to CG. If auditor not
comply with this provision, he shall punishable with fine rupee 1 lakh to
25 lakh.

20. Section 144 – Auditing not to render certain services.
 This section is newly inserted in the Act.
 An auditor appointed under this Act shall provide to the company
only such other services as are approved by the Board of Directors or
the audit committee, as the case may be, but which shall not include
any of the following services :
(a)
(b)
(c)
(d)
(e)
(f)
(g)
accounting and book keeping services;
internal audit;
design and implementation of any financial information system;
actuarial services;
investment advisory services;
investment banking services;
rendering of outsourced financial services;

21. Section 144 – Auditing not to render certain services.
(h) management services; and
(I ) any other kind of services as may be prescribed:
 Provided that an auditor or audit firm who or which has been
performing any non-audit services on or before the commencement of
this Act shall comply with the provisions of this section before the
closure of the first financial year after the date of such commencement.

22. Section 145 – Auditor to sign audit reports etc.
 The person appointed as an auditor of the company shall sign the
auditor’s report or sign or certify any other document of the
company in accordance with the provisions of the Act.
 Qualifications, observations or comments on 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.

23. Section 146 – Auditors to attend general meeting.
 All notices of, and other communications relating to, any general
meeting shall be Auditors to attend general forwarded to the auditor of
the company, and the auditor shall, unless otherwise exempted by the
company, attend either by himself or through his authorised
representative, who shall also be qualified to be an auditor, any general
meeting and shall have right to be heard at such meeting on any part of
the business which concerns him as the auditor.

24. Section 147 – Punishment for contravention.
 For The company and every officer of the company
• Contravention of section 139 to 146 , Shall be punishable with fine
Rs. 25,000 to 5,00,000 to Company. And every officer who is in
default then punishable with imprisonment for a term extend to 1
years or Rs. 10,000 to 1,00,000 or both.
 For auditor
• Contravenes of section 139, 143, 144 and145 shall be punishable
with Rs. 25000 to 5,00,000.
• if auditor willfully or knowingly contravened the above section with
the intention to deceive the company or stakeholder, he shall be
punishable with imprisonment for the period which extended to 1
year and with fine 1 lakh to 25 lakh.

25. Section 147 – Punishment for contravention.
 For auditors
• Where auditor has convicted under sub-section (2), he shall be
liable to refund remuneration and pay for damages arising out of
incorrect or misleading statements made in his audit report.
• The company or authority has to file report with the CG in respect of
such damages by auditor in prescribed manner.
• The partner or partners of the audit firm has or have acted in
fraudulent manner for such act shall be of partner or partners
concerned of the audit firm and of the firm jointly and severely.

26. Section 148 – CG. to specify audit of items of cost in
respect of certain companies.
 The central govt. may be, by order to company for cost audit if
companies engaged in the production of such goods or providing such
services as may be prescribed, direct that particulars relating to the
utilization of material or labour.
• Company have net worth and turnover excess limit prescribed by CG.
then necessary to conducting cost audit by cost auditor with comply of
Cost auditing standard issued by ICWAI under ICWA Act, 1959 with
approval of CG.
• Cost auditor duty to report on conducted cost audit with explanations.
• Company shall duty to furnish report to central government within 30
days from receipt of audit report.
• If any default is made; for every officer liable under section 147(1) and
for the auditor liable under section 147(2-4)

27. Thank You
Prepared and Presented By :
CA-Final Student : Paresh A. Vadher
Em@il: pareshvadher16@yahoo.com
Jamnagar