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26
Jul
16
Variants of Audit under Companies Act, 2013

The new Companies Act, 2013 claims to bring more transparency in the companies working through introducing more strict provisions. Various types of audits are prescribed such as statutory audit, Internal Audit, Secretarial Audit, and cost audit which try to cover each and every aspect of a corporate transaction. The audit is like a regular check up which keeps a watch over the health of the companies.

Various audits are prescribed under the companies Act, which are as follows:

  1. Statutory Audit
  2. Internal Audit
  3. Secretarial Audit
  4. Cost Audit

Let’s understand these different types of audit one by one:

  1. Statutory Audit:

Companies Act, 2013 is the source of this audit requirement. Statutory audit is done by the statutory auditor who must be chartered accountant holding a valid certificate of practice. The auditor is appointed at the annual general meeting for the period of 5 years. There are certain qualifications and disqualification which must be kept in mind before appointing an auditor. The company can either appoint Individual or firm as its auditor.

  1. Internal Audit:

Before understanding the concept of internal audit, you must understand its applicability because internal audit is applicable to certain types of the company as follows:

  1. Every listed company;
  2. Unlisted public limited companies:-
  3. whose paid up shares capital is INR 50 Crore or more during the preceding financial year;
  4. whose turnover are of INR 200 Crore;
  5. Whose outstanding loans and borrowing from banks or public financial institution are more than INR 100 Crore or more; and
  1. Turnover of INR 200 Crore or more; or
  2. Outstanding loans or borrowings from banks or public financial institutions exceeding 100 Crore.

Internal audit can be done by CA, Cost accountant or any other professional because there are not as such eligibility criteria to appoint an internal auditor.

  1. Secretarial Audit:

The Secretarial audit is first time prescribed under the companies act, 2013. Again this is not applicable to every type of company. Only certain types of the companies are required to conduct Secretarial Audit, which are as follows:

  1. Every listed company;
  2. every public company having a paid-up share capital of INR 50 Crore rupees or more; or 
  • Every public company having a turnover of 250 Crore rupees or more.

Only Company Secretary in practice can do a secretarial audit and submit a secretarial audit report which must be annexed to the Board’s report.

The Secretarial audit is very comprehensive audit which includes almost every law which applicable on the particular company. Therefore, Secretarial Audit is like a comprehensive report on the compliance status of an entity.

  1. Cost Audit:

Cost audit is normally applicable to the companies which are into production process or manufacturing. The Central government can also order to conduct the cost audit for certain types of the company. Applicability of the cost audit is prescribed under the section 148 of the companies act, 2013 which is very detailed one. So, it would be advisable to check the criteria whether cost audit is applicable to your company or not.  Cost Audit is done by the cost accountant in practice.

These are summary of the different audits under the companies act only, which are core area of the law to regulate the corporate sector.

12
Jul
16
Auditor| Appointment, Qualification and Disqualification

Auditor plays a vital role in the corporate Governance in region of the world. Auditor in the company is like a doctor who checks the financial health of the company.

Auditor appointment in the company is governed by the Companies Act, 2013. Auditor can be an Individual or firm. There is different time period prescribed for their appointment. The Act states that every company must appoint its auditor in the AGM for a period of five years. It means that the auditor shall hole the office from the date conclusion of the AGM till the 6th AGM of the company.

How appointment of the Auditor is made?

If the Auditor is appointed in the company, which is required to set up audit committee, then such committee will consider the qualification and experience of the proposed auditor whereas a company is not required to set up the audit committee then Board of directors shall consider the above mentioned parameter of the proposed auditor.

After considering the qualification and other parameters, the audit committee recommends the auditor appointment to the board of directors and in cases where such a committee is not required to be set up, the board of directors shall recommend the name of proposed auditor to the shareholders in the AGM.

Though the auditor is appointed for the period of 5 years but such appointment is ratified by the shareholder at the AGM

Conditions for auditor appointment:

There are some conditions which have to be checked before confirming the appointment of the auditor, which are as follows:

  1. The proposed auditor shall submit a certificate with respect to the following points:
  2. The individual or firm is eligible for the appointment and is not disqualified under the Act, the chartered Accountant of India;
  3. The proposed appointment shall be as per the term of the Act;
  • The proposed appointment is within the limit a prescribed by the Act;
  1. The company shall also inform the appointment of the auditor to the ROC in form ADT-1 within 15 days of the meeting in which the auditor is appointed.

Who can be appointed as auditor of the company:

Auditing of the company is not a child play. Because of importance of the audit, only a person who is a Chartered Accountant or a  firm of where majority of partners are chartered accountant can be appointed as auditor of the company.

Who can not be appointed as Auditor of the Company:

Following are the category of the persons who are not eligible to be appointed aa s auditor of the company:

  1. A body corporate except LLP;
  2. An officer or employee of the company;
  3. Any partner or employee of officer or employee of company;
  4. A person who himself or his relative or partner is holding any shares in the company or any other company which its holding or subsidiary company;
  5. A person who or whose relative or partner is indebted to the company or its subsidiary or its holding or associate company or a subsidiary of such holding company, in excess of rupees five lakh shall not be eligible for appointment.
  6. A person who is auditor of more than 20 companies.

A person who is in full time employment elsewhere.

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