This article has  been written by Ms Khushi Sarkhedi  a 1-year BALLB student from

 AURO university .

Introduction

The component of the Indian businesses law that deals with the roles and responsibilities of auditors and auditing standards in India is Section 143 of the Companies Act 2013. The roles of chartered accountants and cost accountants who serve as corporate auditors are also covered in this section. It gives an explanation of what an audit is, what it covers, and the rules that auditors must follow while examining a company’s books and financial statements. Page Contents Powers of the Auditors and Authority of Auditing, Section 143(1) Article 143(2): Submission of the Auditor Report § 143(3): Obligation to express Opinion Section 143(4): Cost Accountants’ Responsibilities and Powers Responsibility to Report Anything Illegal or Wrong, Section 143(5) 143(6). 

Regulations around audit under company act 2013

Every firm must provide a financial statement ending on March 31 every year in accordance with the Companies Act of 2013, which mandates audits. According to Section 133 of the Companies Act, such financial statements must conform to the accounting standards announced by the federal government and provide an accurate and fair representation of the company’s financial activities. The financial statement of the company must also be prepared in the manner and format that may be prescribed for a particular category of company. 

The financial statement required for audit under the 2013 Companies Act shall contain:

Profit & loss account, or revenue & expenditure account in the case of a non-profit organization. the balance sheet financial statement, a statement of any modifications to the number of shares, if any. & An explanation note that is included in or attached to any document referred to.

Provision related to audited companies under companies act 2013

The Companies Act, 2013 (the “Act”) has imposed strict penalties, such as jail, on the firm and its auditors for failing to comply with the applicable rules for the appointment of auditors. Simultaneously, compliances have been simplified while remaining thorough in order to satisfy the demands of modern good corporate governance standards.

 According to Section 139 of the Act, each company must elect an auditor at its annual general meeting who will serve from the end of that meeting until the conclusion of the sixth annual general meeting and afterwards until the conclusion of every sixth meeting. 

A certificate from the individual auditor or the firm stating that the appointment, if made, will be in compliance with the following conditions must also be received prior to the appointment being made, according to Section 139.

Persons Not Eligible For An Audit Under Companies Act, 2013

1. 1. a legal entity recognized by the Limited Liability Partnership Act of 2008 that isn’t an LLP.

   2. an official or employee of the company.

   3. a partner, employee, director, or other member of the company’s staff.

   4. a member of your family or close friend. 

• Rule 6 of the Companies (Audit and Auditors) Amendment Rules, 2018 : explains that while determining the period of five consecutive years or ten consecutive years, as the case may be, the time the person or company held office as auditor previous to the start of the Act shall be taken into consideration.

• The auditor is ineligible for reappointment as auditor in the same company for five years following the conclusion of their tenure. No audit firm may be appointed as the auditor of the same company for a period of five years if it shares a partner or partners with another audit firm whose employment in the company immediately preceding the financial year has ended.

Additionally, if the incoming auditor or audit firm is connected to the departing auditor or audit firm through the same network of audit firms, they are ineligible. The term “same network” refers to a group of businesses that have operated or will operate in the future using the same trade name, brand name, or common control.

According to Section 139(3), a business’s members may decide whether more than one auditor will perform the audit or that the auditing partner and his team would rotate at intervals determined by the members within the audit firm designated by the company.

Regardless of anything contained in sub-section (1), in the case of a Government company or any other company owned or controlled, directly or indirectly, by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments (collectively referred to as “Government undertakings”), the Comptroller and Auditor-General of India shall appoint an auditor duly qualified in respect of a financial year.

Removal resignation of auditors   

Only a special resolution passed by the company with the prior consent of the Central Government may remove the auditor appointed under section 139 from his position prior to the end of his tenure. A request shall be filed to the Central Government in Form ADT-2 with fees as specified for this purpose under the Companies (Registration Offices and Fees) Rules, 2014, in compliance with Rule 7 of the Companies (Audit and Auditors) Rules, 2014. Within thirty days of the Board’s decision, the Central Government must receive the application. Upon receipt of the Central Government’s consent for enacting the special resolution, the corporation must conduct its annual general meeting within sixty days. A resolution at an annual general meeting that names as auditor someone other than an auditor who is retiring or expressly states that an auditor who is retiring cannot be reappointed must give special notice, unless the retiring auditor has served for a continuous period of five years or, as the case may be, ten years. The retiring auditor must get the notice from the company. Unless the representation is received too late, the firm must notify its members of any representation made by the retiring auditor along with a request for its notification. If for some reason it was unable to be sent, it will be read out during the meeting and lodged with the Registrar as well.

The copy of the representation may not be sent, and it is not required to be read aloud at the meeting, if the Tribunal determines following an application by the firm or any other harmed party that the auditor is abusing the privileges granted.

 The auditor who resigned from the company must submit a statement in Form ADT-3 to the company, the Registrar, and, in the case of Government undertakings, the Comptroller and Auditor-General of India, outlining the reasons for his resignation and any other pertinent information.

 This statement must be submitted within thirty days of the date of his resignation. If the auditor violates sub-section (2)’s requirements, he or she may be subject to fines of up to two lakh rupees or a penalty of 50,000 rupees, whichever is less.

 In the event of continued failure, additional fines of 500 rupees may be assessed for each additional day that the failure continues after the first. Either suo moto or modo If a company’s auditor has, directly or indirectly, aided or abetted any fraud by, or in relation to, the company, its directors, or its officers, or has colluded in any such fraud, the Central Government, either suo moto or on an application made to it by the Central Government or by any person concerned, may, by order, direct the company to change its auditors. 

If the Central Government submits the application and the Tribunal determines that a change in the auditor is necessary, it must issue an order within fifteen days of receiving the application directing the applicant to cease serving as an auditor so that the Central Government may appoint another auditor in his place.

Additionally, for a period of five years following the date the decision was given, the auditor in question—individual or firm—against whom the Tribunal has passed a final order under this section shall not be eligible to be hired as an auditor of any corporation. If a firm is involved, the culpability will fall on the firm as well as any partners who committed fraud, helped commit fraud, or conspired with another party to commit fraud on behalf of, or in connection with, the company, its directors, or its officers. 

Statutory audit under the company act , 2013

Section 143 of the Companies Act,2013[1] comprises provisions relating authority and obligations of auditors. The company’s shareholders must hear the statutory auditor’s report on the books of accounts and financial records he inspected. A statutory audit is an audit required by a statute that makes sure the regulators and the public are given an accurate and fair view of the book of accounts. Statutory Audits, as contrast to internal audits, are mandatory if a corporation meets certain requirements. The Statutory Auditor will always have access to books of accounts, vouchers, and other documents, and he has the right to question corporate officers for more details if necessary. Together with other things, the auditor must say in his report if the financial statements give a true and fair representation of the state of the business at the conclusion of the fiscal year. 

Conclusion

This article leads us to the conclusion that, in accordance with the 2013 Companies Act audit. The financial statements of the company must be examined and verified by an auditor in order to accurately and fairly reflect the company’s financial status. An auditor’s job is to give regulators and shareholders assurance about the validity of the company’s financial status. 

This will make it possible for the company’s financial statements to be fully trusted by the shareholders and guarantee complete openness in all business activities.

Refrence

https://taxguru.in/

https://corpbiz.io/

https://wirc-icai.org/

https://corporatelawreporter.com/

Aishwarya Says:

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems to secondinnings.hr@gmail.com

Join our  Whatsapp Group for latest Job Opening