companies act, 2013 - chapter x - audit and auditors
DESCRIPTION
A detailed presentation prepared by SAS Partners Team which gives an insight into the provisions of Chapter X relating to Audit & Auditors. This Chapter has undergone a sea of changes with new concepts introduced. This presentation will prove to be beneficial for the Corporate, Professionals & Students and will give a birds eye view of the provisions and concepts.TRANSCRIPT
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Companies Act 2013Companies Act 2013 –– Session Session IIIICOMPANIES ACT 2013 Chapter X- Audit & Auditors
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Chapter X- Index
� Appointment of Auditor
� Rotation of Auditor
� Disqualification
� Duties of Auditor
� Prohibited Services
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� Prohibited Services
� Reporting of Fraud to Central Government
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Appointment of Auditor [Sec 139] (w.e.f 01.04.2014)
� LLP eligible to become Auditor
� Appointment for a term of 5 years and ratification in every AGM
� Ratification at every AGM by ordinary resolution
� Transition period of three years for complying with the requirement
� If no auditor appointed or re-appointed at the AGM, existing Auditor continues-Sec 139(10)
Particulars Non Government Company Government Company
Appoint of First Auditor By Board
With in 30days (or)
By CAG
With in 60 days of incorporation (or)
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With in 30days (or)
By Members
With in 90 days
of incorporation
With in 60 days of incorporation (or)
By Board
With in next 30 days of incorporation
(or)
By Members
With in 60 days of information
Subsequent Auditors By Members
To hold office till conclusion of 6th
meeting, subject to ratification by members
at every AGM
By CAG
With in 180 days from start of the
Financial Year
Casual Vacancy
Resignation By Members
With in 3 months of recommendation of
Board till next AGM
By CAG with in 30 days
(or)
By Board with in next 30 daysOther Reasons By Board with in 30 days
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Rotation of Auditor [Sec 139 (2) ] (w.e.f 01.04.2014)
Applicable to certain CLASS OF COMPANIES
Individual Auditors - One term (limited to 5 years)
Firm Auditor - Two terms (limited to 10 years)
Cooling Period of 5 years before the reappointment of the same firm.
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Cooling Period of 5 years before the reappointment of the same firm.
• Listed Companies
• Other Public Company – Paid up Capital ≥ Rs. 10 crores
• Private Company – Paid up Capital ≥ Rs 20 crores
• Other Company – Public Borrowing or Public Deposits ≥ Rs 50 crores
Appointment of Auditor [Sec 139] (w.e.f 01.04.2014)
Illustration Explaining Rotation of in case of Individual Auditor.
No. Of consecutive yrs. For which an individual auditor has been functioning as auditor in the same company (in the first AGM held after the commencement of provisions of section 139(2)
Max. No. Of consecutive years from which he may be appointed in the same company (including transitional period)
Aggregate period which the auditor would complete in the same company in view of column I and II
5 years or more 3 years 8 years or more
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5 years or more 3 years 8 years or more
4 years 3 years 7 years
3 years 3 years 6 years
2 years 3 years 5 years
1 year 4 years 5 years
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Appointment of Auditor [Sec 139] (w.e.f 01.04.2014)
No. Of consecutive yrs. For which an individual auditor has been functioning as auditor in the same company (in the first AGM held after the commencement of provisions of section 139(2)
Max. No. Of consecutive years from which he may be appointed in the same company (including transitional period)
Aggregate period which the auditor would complete in the same company in view of column I and II
10 years or more 3 years 13 years or more
9 years 3 years 12 years
Illustration Explaining Rotation in case of Audit Firm
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9 years 3 years 12 years
8 years 3 years 11 years
7 years 3 years 10 years
6 year 4 years 10 years
5 years 5 years 10 years
4 years 6 years 10 years
3 years 7 years 10 years
2 years 8 years 10 years
1 year 9 years 10 years
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Disqualification of Auditors [Sec 141] (w.e.f 01.04.2014)
Auditors RelativePartner
Indebted GuaranteeSecuritiesHolding Company
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Auditor Firm
Direct
Business Relation
Indirect
Subsidiary Associate
Subsidiary
Company
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Disqualification of Auditors [Sec 141] (w.e.f 01.04.2014)
Convicted for 10 years
Auditor’s relative being
Director OR KMP
Auditor in more than
20 companies
Disqualification of Auditors
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KMP companies
Restriction for Non-audit
Services
An Employee/ officer of
the Company
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Disqualification of Auditors [Sec 141] (w.e.f 01.04.2014)
A person, his relative or partner is holding securities or interest in the company orsubsidiary of such company.
A person, his relative or partner which is indebted to the company or its holding companyor associate or a subsidiary company of such holding company.
A person, his relative or partner has given guarantee in connection with indebtedness of any
A person or a firm has a business relationship with the company, its subsidiary, or holdingor associate company or subsidiary of such holding company.
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A person, his relative or partner has given guarantee in connection with indebtedness of anythird party.
A person whose relative is a director or is in the employment of the company as a director orkey managerial person.
A person who has been convicted by court of offence involving fraud and a period of 10years has elapsed from date of such conviction.
A person whose subsidiary or associate company is engaged in consulting and specializedservices as may be prescribed.
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Auditor - Duties
Comply with Auditing Standards also
Upto 20 Companies including Private
Companies for each partner
Report to CG in case fraud committed by officers or
employees
Adverse Remarks in Auditors Report has to
be commented
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To Report Fraud to the Board
To Attend GM unless exempted by the
company
Adverse Remarks in Auditors Report has to
be read in AGM
Report on internal financial reporting
system
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Auditor not to render certain services [sec 144] (w.e.f 01.04.2014)
The Services are :
�Accounting and book keeping services;
� Internal audit;
�Design and implementation of any financial information system;
�Actuarial services;
�Investment advisory services / banking services;
The said services should notbe rendered by a person whomakes use of the Auditor’sTrade Mark or Brand Name
The said services should notbe rendered by parent ,subsidiary or associate entityof the Auditing Firm
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�Investment advisory services / banking services;
�Rendering of outsourced financial services;
�Management services and
�Any other kind of services as may be prescribed.
Transition Period: Till the closure of First FY after the commencement of this Act
The said services should notbe rendered by relatives orany other person associatedwith the Auditor of theCompany
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Reporting of Fraud to Central Govt. [Sec 143(12)] (w.e.f 01.04.2014)
By Whom Officers or Employees of the Company
Affected person Company
MANNER OF REPORTING TO CENTRAL GOVERNMENT
Within 60 days of knowledge of Auditor
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Board/ Audit Committee
Board Replies to Queries Board does not Reply
Central Government
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Reporting of Fraud to Central Govt. [Sec 143(12)] (w.e.f 01.04.2014)
WHOM TO SEND THE REPORT OF FRAUD
Secretary, MCA
Registered Post with Speed Post and e-mail
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Acknowledgment Due confirmation
This Section also applies to Secretarial & Cost Auditor, while carrying out theSecretarial Audit u/s 204 and Cost Audit u/s 148 respectively
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