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Audit under Companies

Requirement under Companies Act, 1956

Every company registered in India is required to get its accounts audited by a practicing Chartered Accountant. Section 224 (1) of the Companies Act, 1956 states that every company, whether it is public or private, shall have an auditor to audit its accounts.

This audit is called statutory audit and through it the Companies Act ensures that the persons carrying on business with others money are accountable to them.

Appointment of Auditors

The appointment of auditor is mandatory in the Annual General Meeting for the following year. The auditors appointed at the Annual General Meeting hold the office from the conclusion of the Annual General Meeting at which he is appointed until the conclusion of the next Annual General Meeting. Thus, the Act seeks to ensure that the appointment of auditors is not in the hands of the directors and is vested in the general body of shareholders.

However, the first auditors of the Company are appointed by the Board of Directors within one month from the date of incorporation of a company. The auditors, so appointed, hold the office until the conclusion of the first annual general meeting of the Company. If the Board fails to appoint the first auditor, the company may do so at a general meeting.

Who can be appointed as Auditors?

As per Sec 226 of Companies Act, 1956, a person who is Chartered Accountant within the meaning of Chartered Accountants Act, 1949 and holds a certificate of practice, or a partnership firm where of all the partners are Chartered Accountants holding certificates of practice, may be appointed as auditor of a company. However, in the latter case, the appointment as an auditor may be made in the firm name and any of its partners may act in the name of the firm.

The following persons cannot be appointed as auditor of a Company:

  1. An officer or employee of the company;
  2. A person who is partner with an employee of the company or employee of an employee of the company;
  3. Any person who is indebted to a company for a sum exceeding Rs. 1,000/- or who have guaranteed to the company on behalf of another person for a sum exceeding Rs. 1,000/-.
  4. A person who is holding any security of that company, after a period of one year from the date of commencement of Companies (Amendment) Act, 2000.

If an auditor, after his appointment, becomes subject to any disqualification mentioned above, he shall be deemed to have vacated as such.

Do the accounts of branch office need to be audited?

Yes. As per section 228 of the Companies Act, 1956, where a company (whether public or private limited) has a branch office, its accounts should also be audited. The audit of the accounts of branch office can be done either by:

  1. the company’s auditor; or
  2. by any other person who is qualified to act as the company’s auditor

However, if the branch is situated in a country outside India, a person who is duly qualified to act as auditor of the branch in accordance with the laws of that country can also be appointed as auditor of branch.

If the branch is not being audited by the company’s auditor, even then he is entitled to visit the branch office if he considers it necessary to do so for the performance of his duties as the auditor. He has a right of access at all times to the books, accounts and vouchers of the company maintained at such branch office.

What we can do for you?

We are qualified to be appointed as auditors under the Companies Act. We possess the requisite knowledge and skill to conduct audit of a company to given an unbiased and independent opinion based on an objective assessment of facts.

 

 

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