1.
Introduction
When
a person is an accountant or when a firm is accounting firm, and duty of such
person or firm is to examine financial records or status of an individual or
entity, such person or firm is called auditor. In a company, only one or a
number of auditors can be appointed. An auditor possesses powers to examine
books, vouchers and documents, which are about business of company. However, he
is not a mere clerk or bookkeeper in employment of company.
2.
Meaning of Auditor
According
to BLACK’S LAW DICTIONARY, Auditor means a person who checks the accuracy,
fairness and general acceptability of accounting records and statements and
then attests to them.
FIRST
AUDITORS
The
rule with regard to the appointment of first auditor is as under
(i)
By Directors
The
first auditor must be appointed by the directors of the company within 60 days
of incorporation of the company.
(a)
Duration of office
The
first auditor may hold his office until the end of first annual general
meeting.
(b)
Filling of casual vacancy
A
casual vacancy in the office of auditor may be filled by the directors but
while the vacancy continues, the surviving or continuing auditor or auditors,
if any, may act.
(c)
Duration of casual vacancy
Any
auditor appointed to fill in any casual vacancy may hold office until the end
of the next general meeting.
(ii)
By company
If
the directors fail to exercise their powers of appointing the first auditor,
the company in general meeting may appoint the first auditor.
(a)
Removal and new appointment
The
company in general meeting may remove the first auditors and appoint another
auditors, who have been nominated for appointment by any member and of whose
nomination notice has been given to the members of the company not less than 14
days before date of meeting.
(iii)
By commission
If
the company in general meeting does not appoint the first auditors within 120
days of the date of incorporation of the company. The commission may appoint
the first auditors to fill the vacancy.
SUBSEQUENT
AUDITORS
Subsequent
appointments are made by the company in general meeting. Every company must at
each annual general meeting appoint an auditor to hold office until the next
annual general meeting.
NOTICE
OF APPOINTMENT
(1)
Special notice must be given of a resolution at annual general meeting of the
company appointing as auditor a person other than the retiring auditors.
(2)
The member must give such a notice to the company not less than 14 days before
the annual general meeting.
(3)
On receipt of special notice the company must forthwith (a) send a copy to
the retiring auditor (b) given notice thereof, to its members not less than 7
days before the date fixed for the annual general meeting.
(5) Qualifications for the appointment of auditor
Following
are the qualifications for the appointment of auditor
(a)
In case of Public company
In
order that a person may become an auditor of a public company, he must be
chartered accountant.
(b)
In case of Private company
In
order that a person may become a auditor of private company, he must be in the
employment of director or officer of such company.
6. Disqualifications of Auditor
Following
are the disqualifications of the auditor
(i)
A director or officer of the company
(ii)
A partner of such director or officer;
(iii)
Any person in the employment of such director or officer (except in a private
company not being a subsidiary to a public company);
(iv)
Any person indebted to the company.
7. Powers of Auditor
The
powers of an auditor are as under
(i)
Access to Books
Every
auditor of a company has a right of access at all times to the books of
accounts and vouchers of the company. This power is exercisable whether books,
etc are kept at the registered office of the company or elsewhere.
(ii)
Requiring Information
He
has the power to require from the directors and officers such information and
explanation as he may consider necessary for the performance of his duties.
(iii)
Right to attend meeting
He
is entitled to receive notice of and attend any general meeting of the company
at which any accounts which have been examined or reported on by him are to be
laid down by the company.
(vi)
Right to make statement
He
is entitled to make any such statement or explanation which he desires in
respect of the accounts.
8. Duties of Auditors
The
duties of the auditors may be briefly sated hereunder
(i)
Acquaintance with duties
They
must acquaint themselves with their duties under the articles and the ordinance
(ii)
To make report
They
must make a report to the members on the books of accounts, balance sheet, and
loan account etc.
(iii)
Duty to act honestly
They
must act honestly and with reasonable care and skill before they believe that
what they have certify is true.
(iv)
To examine books
They
must examine the books to ascertain that the books show the true financial
position.
(v)
Duty to inquire
The
duty of the auditor is not to confine himself merely to verifying mathematical
but to inquire into its substantial accuracy.
(vi)
Duty regarding payment and debts
The
auditors should see that payments made and sums borrowed by the company are in
accordance with the articles and the ordinance.
(vii)
Duty to examine Bank’s accounts
The
auditors must check cash in hand and balance at bank by inspecting bank statement
or obtaining a certificate from bank.
(viii)
Duty not to give advice
They
should not give advice either to directors or members, as to what they ought to
do, and whether the business is being conducted prudently or imprudently,
profitably or unprofitably.
Conclusion
To conclude, it can
be stated that an auditor of company has to play an important role. To fulfill
his duties, an auditor has to remain honest, has to remain acquainted with his
duties under articles of association and under companies’ ordinance, and has to
make report on all material points of accounts.
0 comments:
Post a Comment