Company Auditors play an important role in making sure a company’s financial statements are true and transparent. Auditors are responsible for keeping the business trustworthy to the stakeholders, shareholders and the regulatory authorities. Section 139 of the Companies Act, 2013 is very clear about the qualification, disqualification and process of appointment of a company auditor in India. In this blog, we will list out all these aspects in simple words so that Indian users can know the important stuff.
Qualifications of a Company Auditor
Some qualifications must be met to become eligible as a Company Auditor. It is these qualifications that guarantee that only those experts who can assess a company’s finances possess such skills.
- Chartered Accountant (CA) – The primary qualification for a company auditor is being a member of the Institute of Chartered Accountants of India (ICAI). An audit and reporting on the financial statements of a company can happen only when he (the person) is qualified to do that.
- Firm of Chartered Accountants – If the auditing is done by a firm, then all partners must be chartered accountants. The audit report must be signed by a practising chartered accountant, however.
- MCA Registration – A company auditor must be registered with the Ministry of Corporate Affairs (MCA) as a practising professional. It is necessary to register to meet availing statutory audit conditions.
Important Note
Only those who have the qualifications above can be appointed as a company auditor in India. You want to make sure your business complies with these regulations so you don’t get penalised.
Disqualification of a Company Auditor
There are certain qualifications but the Companies Act, 2013 also states how an individual or firm is not qualified to be appointed as a Company Auditor. To prevent any conflicts of interest, and to avoid the auditor being biased, these disqualifications are in place.
- Body Corporate – A company cannot appoint another body corporate or company as an auditor.
- Employee of the Company – Any employee of the company or its subsidiary cannot be appointed as an auditor. It will prevent conflicts of interest, as the employee has an inherent bias.
- Indebtedness – An individual or firm that is indebted to the company for an amount exceeding Rs. 1,000 is disqualified from becoming an auditor.
- Relative’s Financial Interest – If the auditor’s relative holds significant financial interest in the company, it may disqualify the auditor.
- Business Relationship – An individual or firm with a substantial business relationship with the company other than audit services cannot be appointed as the company’s auditor.
- Fraudulent Practices – If an auditor has been found guilty of any fraudulent practice or is involved in any criminal activities, they are disqualified from holding the position of a company auditor.
Tip
The qualifications and disqualifications of all considered auditors are essential for a company’s compliance and the chosen auditor must fulfil all the required qualifications and be free of disqualifications.
Appointment of a Company Auditor (Section 139 of Companies Act, 2013)
Section 139 of the Companies Act, 2013 governs the appointment of a Company Auditor. These are the procedures and tenure to which the appointment of auditors in Indian companies accrues.
1. First Auditor
Within 30 days of incorporation, the Board of Directors must appoint the first auditor of a company, other than a government company. In the event that the Board does not appoint the auditor, it must be appointed by the shareholders within 90 days at an Extraordinary General Meeting (EGM).
2. Subsequent Auditors
The appointment for the first auditor after the appointment of the first auditor must be held at the Annual General Meeting. The tenure is for five years, from the conclusion of that AGM to the conclusion of the sixth AGM, and the appointed auditor holds office until the conclusion of that sixth AGM.
3. Reappointment of Auditor
When the auditor’s tenure is completed, they may or may not be reappointed, but only if the company fulfils the condition for reappointment.
4. Removal or Resignation of Auditor
The company can cut short the term of any auditor by passing a special resolution. However, the auditor is also entitled to resign any time before the expiration of his term of office and in such a case; he is supposed to inform the company and the Registrar of companies of such resignation.
5. Auditor’s Consent
An auditor must declare in writing that he/she will act as auditor to the company, before being appointed. That means that if they undertook the work, the auditor would have had no conflict of interest and would have been aware of what they took up!
Key Responsibilities of a Company Auditor
The role of a Company Auditor in ensuring the financial transparency and accountability of the company is quite important. Here are the primary responsibilities of an auditor:
- Auditors review and examine Financial statements – They examine the company’s financial records, to see whether they are by the statutory provisions.
- Examines Financial statements — The auditor goes through financial statements prepares detailed audit reports and then shares them with the company’s stakeholders.
- Auditing and Corporate Complier (ACC) – After the auditor ensures that the company complies with the financial regulations as laid down in the Companies Act, 2013.
- An auditor identifies Fraud – One of the important performing tasks of an auditor is to detect and point out the FRAUD or any financial discrepancy in the company’s records.
How Apkireturn Can Help with Company Auditor Services
At Apkireturn, we respect that you don’t necessarily know how to go about appointing an audit firm, so we make it easier for you. Our team of experts is here to help you with the following.
- Company Auditor appointments
- Company Incorporation
- GST and ITR Filings
We take care of all legal requirements that your company should comply with within the Company’s Act, 2013. You can contact our tax consultants in Jaipur at any time for hassle-free assistance.
Conclusion
The Company Auditor plays a very important role in the maintenance of financial transparency in any organization. And, the auditor must have fulfilled the needed qualifications; and should not be disqualified from auditing. The Companies Act, 2013, Section 139 spells out clear direction regarding the appointment, reappointment and removal of company auditors.
At ApkiReturn, we’re an expert at making the appointment process hassle-free and explaining the legally required process. If you want to appoint a company auditor or have any other concerns you may need help with relating to the balance sheet, contact us at 766 515 6000.