The audit appointed and auditor under rule 3 shall submit a certificate that
The firm or the individual, as may be the case, is eligible for appointment and is not disqualified under the Act for appointment, the Chartered Accountants Act, 1949 and the regulations or rules there under made.
the appointment proposed is as per provided given the term under the Act;
the appointment proposed is within the laid limits by or under the authority of the Act.
the proceedings list against the auditor or any audit firm partner or audit firm pending in accordance of professional matters of conduct as mentioned in the certificate is correct or true.
The Registrar notice about appointment under fourth of auditor proviso to sub-section (1) of section 139 shall be in Form ADT-1.
Companies class.
For the sub-section (2) purposes of section 139, the companies class shall mean the following companies classes excluding companies of one person and small companies.
a, all public companies unlisted having share capital paid up of ten crore rupees or more.
b, Every private limited companies having share capital paid up of more or rupees twenty crore rupees
c, All companies having capital paid up share capital of less than limit threshold indicated in (a) and (b) above, but having borrowings public form financial institutions, public deposits or banks of rupees more or fifty crores.
Rotation manner of auditors by the companies of their term on the expiry.
The audit committee shall recommend to the Board, an individual name of the auditor or of an audit firm who may replace the incumbent auditor on term of expiry of incumbent such.
Where a needed company to constitute an Audit Committee, the Board shall think about such committee and in other cases, the board itself shall consider the rotation matter of auditors and make recommendation for next auditor appointment in annual general meeting by the members.
For the rotation of auditors purpose.
a, in an auditor case (whether an audit firm or individual), the period for which the firm or the individual has held office as prior auditor of the Commencement Act shall be taken into the account for five consecutive years calculation period as may be the case or ten consecutive years.
ii, the auditor incoming or audit firm shall not be eligible if auditor such or audit firm is associated with an auditor outgoing or audit firm under the network of same firms.
For the rules purpose the term “same network” includes the operating firms or functioning, in future or hitherto, under the same name of brand, name of trade or common control.
For the purpose of auditors rotation
a, a break for continuous period of five years in the term shall be taken as fulfilling the the requirement of rotation.
b, if a partner, who is in audit firm in charge and also certifies the company financial statements retired from the mentioned firm and joins the chartered accountants another firm, such other firms shall be also not eligible to be appointed for a five years period.
2. Consecutive years shall mean all the prior financial years for which the individual auditor has been auditor until there has been by five years break or more.
2. Consecutive years shall mean every prior financial years for which the firm has been the auditor until there has been by five years break or more.
Where a company has appointed two or more firms or individuals or thereof combination as joint auditors, the company may follow the auditors rotation in such a manner that both or every joint auditors, as may be the case, do not complete in the same year of the term.
Removal before expiry of his term of the auditor.
The Central Government application for auditor removal shall be made in Form ADT-2 and shall be accompanied as provided with fees for the purpose under the companies (Registration Fees and Offices) Rules, 2014.
The application shall be made by the Central Government within the resolution of thirty days passed by the Board.
The company shall hold the general meeting within sixty days of receipt of the Central Government approval for passing the resolution which is special.
Auditor resignation.
For the purpose of sub-section (2) of section 140, when an auditor has resigned from the company, he shall file a statement in Form ADT-3.
Liability on concerned partners to devolve only.
In a criminal liability case of any audit firm, other than the fine, shall only devolve on the partners concerned or partner, who acted in a fraudulent abetted or manner or , as may be the case, colluded in fraud.
The auditor disqualifications.
For the purpose to sub-clause (1) of proviso of clause(d) of sub-section (3) of section 141, an auditor relative may hold in the company securities of face value not exceeding one lakh rupees.
Provided that under this sub-rule shall the condition, wherever relevant, be also applicable in the company case not having other securities or share capital.
Further provided that in the acquiring event any interest or security by a relative above prescribed the threshold, the corrective action to maintain as specified above the limits shall be taken within sixty days by the auditor of such interest or acquisition.
For the purpose of sub-clause (iii) of clause (d) of sub-section (3) of section 141 a person who or whose relative or partner has given a guarantee or provided any security in connection with the indebtedness to the company of any third person or its subsidiary, or its holding or associate company or of such holding subsidiary company in excess of rupees one lakh shall not be eligible for appointment.
For the clause (e) of sub-section (3) of section 141 purpose, the term “business relationship” shall be construed as entered any transaction into for commercial purpose except —
a, Commercial transactions that are in the nature of services which are professional allowed to be rendered by an audit firm or auditor under the Act and the Chartered Accountants Act, 1949 and the regulations and the rules made under those Acts.
b, Commercial transactions that are in the business ordinary course of the company at arm’s length price — like sale of products or auditor services, as customer, in the business ordinary course, by companies indulged in the telecommunication business.
Other matters in auditor’s report to be included.
The report of auditor’s shall also include their comments and views on the matters following, namely:-
a, whether the company has the impact disclosed, if any, of ligitations pending in its financial statement on its financial position;
b, whether the company has provision made, as needed under any accounting standards or any law, for material losses foreseeable, if any, on the long term contracts including contracts derivatives;
c, whether there has been in transferring amounts any delay, needed to be transferred, to the Investor Education and Protection Fund by the Company.
Duties and the company’s auditor powers to the audit with the reference of the branch and the auditor of the branch.
For the purposes of section 143 of sub-section 8, the duties and powers of the auditor of the company’s with reference to the branch audit and the branch auditor, if any, shall be contained in sub-sections (1) to (4) of section 143.
The auditor of the branch shall submit his report to the auditor of the company’s.
The sub-section (12) provisions of section 143 read with rule 12 here under regarding reporting of fraud shall also extend by the auditor to auditor of such branch to the extent it relates to the branch concerned.
By auditor reporting frauds.
For the purposes of sub-section (12) of section 143, in case the auditor has reason which is sufficient to believe that an offence indulging fraud, is being or has been committed against by officers of the company or the company employees he shall report the matter to the Central Government immediately but not later than his knowledge of sixty days and the procedure after following herein indicated below.
a, auditor shall forward his report to the Board or the audit committee, as may the case, after immediately he comes to the fraud knowledge, seeking their observations or reply within forty-days.
b, of such reply on receipt or the auditor observations the auditor shall forward his reply and report or the board observations or along with the Audit Committee his comments (on such observations of the board or reply or the Audit Committee) to the Central Government within receipt of fifteen days of such observations or reply.
in case fails the auditor to get any observations from the Board or any reply or the Audit Committee within forty five-days stipulated period, he shall forward his report to the Central Government along with a note containing his report details that was forwarded to the board earlier or the Audit Committee for which he failed to receive any observations or any reply within the time stipulated.
The report shall be sent to the Ministry of Corporate Affairs, to the secretary in a cover that was sealed by Registered post with Acknowledgement or by a speed post followed by an e-mail of the same in confirmation.
The report shall be on the auditor letter-head containing postal address, contact number and e-mail address and by the auditor signed with his seal and shall specify his Membership Number.
The report shall be as specified in the form of statement in Form ADT-4.
This rule provision shall apply also, mutatis mutandis, to the auditor cost and a auditor secretarial during his duties performance under section 148 and respectively section 204.
Remuneration of the Auditor Cost.
For the purpose of section 148 of sub-section (3) of section 148.
a, In the case of companies that are needed to constitute an audit committee–
1, The Board shall appoint an individual, who is cost accountant in practice or a firm in practice of cost accountant, as cost auditor of the Audit committee on the recommendations, that also shall recommend for such cost auditor remuneration.
2. The recommended remuneration by the Audit Committee under (i) shall be approved by the Board of Directors and considered and subsequently ratified by the shareholders.
3. In the case of other companies that are not needed to constitute an Audit committee, the Board shall appoint an individual who is in practice of cost accountant or firm of cost accountants as cost auditor in practice and the such cost auditor remuneration by shareholders shall be ratified subsequently.
